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2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP, Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and Yp. A. Is this SR equilibrium a recessionary gap or an inflationary gap? B. Assume the Fed decides to act. How would you suggest they use or alter each of the following? - Open Mkt Operations - Required Reserve Ratio - Discount/Federal Funds Rates C. Explain carefully how the changes in part B eventually alter AD. Explain each step. D. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. E. As the economy moves from Yo to Yp, what happens to the following measures of the aggregate economy? - Real GDP - the unemployment rate - The price level - the rate of inflation

2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP, Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and Yp. A. Is this SR equilibrium a recessionary gap or an inflationary gap? B. Assume the Fed decides to act. How would you suggest they use or alter each of the following? - Open Mkt Operations - Required Reserve Ratio - Discount/Federal Funds Rates C. Explain carefully how the changes in part B eventually alter AD. Explain each step. D. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. E. As the economy moves from Yo to Yp, what happens to the following measures of the aggregate economy? - Real GDP - the unemployment rate - The price level - the rate of inflation

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter24: The Aggregate Demand/aggregate Supply Model
Section: Chapter Questions
Problem 59CTQ: Review the problem in the Work It Out titled Interpreting the AD/AS Model. Like the information...
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2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP, Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and Yp. A. Is this SR equilibrium a recessionary gap or an inflationary gap? * C. Explain carefully how the changes in part B eventually alter AD. Explain each step. B. Assume the Fed decides to act. How would you suggest they use or alter each of the following? - Open Mkt Operations - Required Reserve Ratio - Discount/Federal Funds Rates D. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. E. As the economy moves from Yo to Yê, what happens to the following measures of the aggregate economy? - the unemployment rate - the rate of inflation - Real GDP - The price level
Transcribed Image Text:2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP, Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and Yp. A. Is this SR equilibrium a recessionary gap or an inflationary gap? * C. Explain carefully how the changes in part B eventually alter AD. Explain each step. B. Assume the Fed decides to act. How would you suggest they use or alter each of the following? - Open Mkt Operations - Required Reserve Ratio - Discount/Federal Funds Rates D. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. E. As the economy moves from Yo to Yê, what happens to the following measures of the aggregate economy? - the unemployment rate - the rate of inflation - Real GDP - The price level
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