Suppose the economy is initially at potential GDP.
(A) Draw an agregate demand curve and price adjustrient line, and label the intial equilibriun with an $A$.
(B) Suppose guverment purchases increase. Illustrate the short-run effect an your diagram. Label the new equilibrium writh a $A$.
(C) Eigalain the short-run effect an $C , I , Q , X , R$, and infletion as campared to baseline.
(D) Illustrate the long-run effect on your diagram and label the long-run equilibriun writh $C$
(E) Eoglain the long-run effect an $C , I , G , X , R$ and inflation as campared to baseline.

Question

Suppose the economy is initially at potential GDP.
 (A) Draw an agregate demand curve and price adjustrient line, and label the intial equilibriun with an $A$.
(B) Suppose guverment purchases increase. Illustrate the short-run effect an your diagram. Label the new equilibrium writh a $A$.
(C) Eigalain the short-run effect an $C , I , Q , X , R$, and infletion as campared to baseline.
(D) Illustrate the long-run effect on your diagram and label the long-run equilibriun writh $C$
(E) Eoglain the long-run effect an $C , I , G , X , R$ and inflation as campared to baseline.

Quizplus · Accepted Answer

The Answer of Suppose the economy is initially at potential GDP.
 (A) Draw an agregate demand curve and price adjustrient line, and label the intial equilibriun with an $A$.
(B) Suppose guverment purchases increase. Illustrate the short-run effect an your diagram. Label the new equilibrium writh a $A$.
(C) Eigalain the short-run effect an $C , I , Q , X , R$, and infletion as campared to baseline.
(D) Illustrate the long-run effect on your diagram and label the long-run equilibriun writh $C$
(E) Eoglain the long-run effect an $C , I , G , X , R$ and inflation as campared to baseline.

Suppose the Economy Is Initially at Potential GDP AAA (B) Suppose Guverment Purchases Increase

Suppose the Economy Is Initially at Potential GDP $A$
(B) Suppose Guverment Purchases Increase