Supply-Side Policies: Supply-side policies involve measures to increase the production and and development. Supply-side policies can help to increase the potential output of the economy, efficiency of goods and services in the economy. This can include investments in education and training to improve the skills of workers, as well as incentives for businesses to invest in research which can help to mitigate the negative effects of a negative supply shock. However, these policies may take time to have an effect and may not be sufficient in the short term to address the immediate impacts of a negative supply shock. Explain this graphically please.

Supply-Side Policies: Supply-side policies involve measures to increase the production and and development. Supply-side policies can help to increase the potential output of the economy, efficiency of goods and services in the economy. This can include investments in education and training to improve the skills of workers, as well as incentives for businesses to invest in research which can help to mitigate the negative effects of a negative supply shock. However, these policies may take time to have an effect and may not be sufficient in the short term to address the immediate impacts of a negative supply shock. Explain this graphically please.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter15: Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical

Section: Chapter Questions

Problem 5E

See similar textbooks

Similar questions

Three of the following events can be classified as a supply shock and one as a demand shock. Which one of the following represents the demand shock? A: A fall in the exchange rates boosts exports of manufactured goods. B: European regulations ensure all workers get paid overtime. C: Scientists in Russia discover a new form of low carbon oil. D: A strike wave spreads across Chinese and Indian farm workers.
Myanmar experienced a 60 percent currency dropped within four weeks as the economy tanks since early of this year. This is due to the country facing a military coup since February 2021, which has led to political instability and the second wave of coronavirus infections in the country. The World Bank predicted the economy would slump 18 percent, which lead to the employment contraction and an increase in the number of poor. As an economist, analyze the fiscal and monetary policy tools that can be implemented to overcome the recession in Myanmar.
The consequences of climate change on the economy is a popular topic in the media. Suppose that a series of wildfires destroys crops in the western states at the same time a hurricane destroys refineries on the Gulf Coast. a) Using aggregate demand and supply analysis, explain how output and the inflation rate would be affected in the short and long runs. b) Show your answer graphically.
Which of the following would properly be classified as an unfavorable supply shock? a)The interest rate decreases, spurring investment spending. b)The government introduces a set of market reforms that strengthens property rights and makes it easier and safer for buyers and sellers to write contracts. c)The world price of oil increases rapidly without warning and is expected to remain at the new high level for many years, making it more expensive for all firms to produce goods and services. d)There is a technological improvement that allows firms to reduce their costs of production permanently. e)There is an increase in government spending.
AD/AS model. Country A is an oil exporting country. The aggregate demand and supply functions are given as below: AD : Y = 710 − 30P + 5G+3Poil AS : Y = 10 + 5P − 2Poil where Y is real GDP, P is the price level, G is the government purchases, and Poil is the world price of oil. Write down the equilibrium condition. Solve for the equilibrium value of real GDP and the price level (hint: take G and Poil as known variables). Draw the AD/AS graph to show when Poil rises in the world market, what will happen the AD and SAS curves. Explain the price level effect and the output effect due to the change of the oil price.
Which of the following is correct? Nominal GDP uses the price level from the benchmark year to adjust for inflation / deflation. According to Doug Irwin, the 'limit to globalization' arises due to the large size of the service sector. Conventional (non-PPP adjusted) GDP per capita overstates the true extent of income levels of poorer countries. Small countries tend to have small openness (i.e., (exports+imports)/GDP). Ad valorem equivalent of specific tariffs are not affected by inflation / deflation.
The internet and jet engine are examples of technology that caused Beneficial demand shocks Harmful demand shocks Beneficial supply shocks Harmful supply shocks
Identify each of the following topics as being part of microeconomics or macroeconomics: the impact of tax policy on national saving (a) macroeconomics (b) microeconomics
Subsidies: Governments can provide subsidies to businesses that are most affected by the supply shock. For example, if a sudden rise in the price of oil is causing higher transportation costs, governments can provide subsidies to help offset those costs. Explain that graphically please.
Scenario You are a member of the president's Council of Economic Advisers for the country of Manulo. Currently the economy of Manulo is operating at full employment, but a new crisis has hit the nation of Zedland, a major trade partner. Zedland's unemployment has hit record highs and stock market has crashed unexpectedly. Your team must analyze how this external shock may impact the economy in Manulo. Prepare a brief report that answers the following questions: 1. Which curve, aggregate demand (AD), short run aggregate supply (SRAS) or long run aggregate supply (LRAS) would immediately shift in response to the crisis in Zedland? In which direction (left or right? Explain your rationale. In other words, why does the curve shift? 2. Compare the expected movements in equilibrium GDP and price level in the short run. In other words, compared to the starting point (before the shift) what happened to output and price level (increased, decreased or stayed the same) and after the shift? 3.…
Governments closely monitor the growth and contraction of their economies in order to manage the well-being of their citizens. When economies grow, well-being generally increases. When economies contract, the resulting reduced consumption usually causes hardship. To avoid contraction (also called recession), governments use fiscal and monetary policies to stimulate the economy. Fiscal policy operates based on government budgets, spending, and tax rates. Monetary policy is a tool of central banks and consists of changes to monetary supply and interbank lending rates. For this activity, What is today’s U.S. Federal Reserve Bank’s discount rate? When did the discount rate last change and why? Look for trends and predictions. What is the consensus? What about this consensus should make people feel secure or anxious?
What happened first was a major policy-induced supply shock. The lockdown forced firms in several directly affected sectors, from restaurants to hotels to airlines, to halt (or at least to drastically decrease) supply. In contrast to other supply shocks analyzed earlier in the book, many firms had no choice other than to stop or decrease production. As a result of sharply lower output, and thus lower income, and of increased uncertainty, this shock had a major effect on demand, not just in the sectors directly affected by the lockdown, but also in the non-affected sectors. Thus, the outcome was a combination of a supply shock and a sharp demand response. In that context, the role of macroeconomic policy was twofold. First: While it could not do much to increase output in the affected sectors, it needed to protect the firms in those sectors from going bankrupt and the workers who lost work from going hungry. Second: It needed to limit the effect of lower demand in the non-affected…