Depict in the AD-AS model, an economy exhibiting a short run equilibrium with a negative output gap resulting from a decline in AD caused by falling investment spending. What is true about the level of unemployment in this circumstance?What is true about the utilization of capital in this circumstance?What are the implications of your statements in parts a and b for long run adjustments in resource prices?How will these changes in resource prices impact the economy in the long run? Depict this change in your graph.

In the graph, initial long-run equilibrium is at point A where AD0 (aggregate demand), LRAS0…

Answered: Depict in the AD-AS model, an economy…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model

Section: Chapter Questions

Problem 3CQ

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Depict in the AD-AS model, an economy exhibiting a short run equilibrium with a negative output gap resulting from a decline in AD caused by falling investment spending.

What is true about the level of unemployment in this circumstance?
What is true about the utilization of capital in this circumstance?
What are the implications of your statements in parts a and b for long run adjustments in resource prices?
How will these changes in resource prices impact the economy in the long run? Depict this change in your graph.

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