Suppose global supply-chain production disruptions cause an increase in businesses' production costs. (a) Describe and illustrate...

  

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Suppose global supply-chain production disruptions cause an increase in businesses' production costs. (a) Describe and illustrate the short-run effects on the price level, real GDP, and employment. (b) Given the state of the economy in the short-run (answer to problem (a)), suppose the government passes a bill to give businesses grants to financially support businesses during the difficult time. Illustrate the impact of this policy on price level, real GDP, employment, and wages. Compared to the original long-run equilibrium, what happened to the price level and real GDP as a consequence of your government policy? HINT: To answer this question, begin your answer with the graph in your answer to part (a) (just duplicate your graphs in the answer to (a)). Then add to to the graph the impact of your government policy. (c) Given the state of the economy in the short-run (answer to problem (a)), suppose the government passes a tax rebate bill that gives most consumers $800 to spend or save as they please. Illustrate the impact of this policy on price level, real GDP, and employment. Compared to the original equilibrium, what happened to the price level and real GDP as a consequence of your government policy? HINT: To answer this question, begin your answer with the graph in your answer to part (a) (just duplicate your graph in the answer to (a)). Then add to to the graph the impact of your government. policy. Suppose global supply-chain production disruptions cause an increase in businesses' production costs. (a) Describe and illustrate the short-run effects on the price level, real GDP, and employment. (b) Given the state of the economy in the short-run (answer to problem (a)), suppose the government passes a bill to give businesses grants to financially support businesses during the difficult time. Illustrate the impact of this policy on price level, real GDP, employment, and wages. Compared to the original long-run equilibrium, what happened to the price level and real GDP as a consequence of your government policy? HINT: To answer this question, begin your answer with the graph in your answer to part (a) (just duplicate your graphs in the answer to (a)). Then add to to the graph the impact of your government policy. (c) Given the state of the economy in the short-run (answer to problem (a)), suppose the government passes a tax rebate bill that gives most consumers $800 to spend or save as they please. Illustrate the impact of this policy on price level, real GDP, and employment. Compared to the original equilibrium, what happened to the price level and real GDP as a consequence of your government policy? HINT: To answer this question, begin your answer with the graph in your answer to part (a) (just duplicate your graph in the answer to (a)). Then add to to the graph the impact of your government. policy.

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a In the short run global supplychain disruptions causing an increase in businesses production costs would likely lead to several effects 1 Price Leve... View the full answer