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A macroeconomics homework assignment focusing on the AD-AS model. It covers various scenarios of fiscal and monetary policies, including tax cuts, government expenditure, and interest rates. Students are required to analyze the short- and long-term effects on equilibrium price and output levels using graphs and explanations.
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Name:____________________ Section:____________________ Due 10 / 28 or 10 / 29 in assigned Section [Part A] Short Questions ( 20 points, 2 points each) Fill in the blanks
[Part B] AD-AS Model (40 points, 8 points each)
Yes. It is the long-run equilibrium as well. At EQ*, the economy is underperforming and experiencing inflation at the same time. This is called a stagflation. The government’s intentions in increasing government expenditure would be to get out of this situation by providing a boost to aggregate demand.
B’s plan shifts the AD curve to the right. In the short run this will increase output and jobs, but in the long run it will all revert back to the original level as before.