How Market Will Eventually Fix Itself Given Enough Time - 275 Words

How Market Will Eventually Fix Itself Given Enough Time (Coursework Sample) Content: Part 2: Short Answer 1 Draw an aggregate supply and aggregate demand model showing an economy in a recessionary gap. Explain how the market will eventually fix itself given enough time, and also explain what the government might be able to do to get the economy back to full-employment faster. Although both methods will get us to full-employment, what is the main difference between the two? (8 points)ANSWER:103822518605500LRAS26955751174750018288008572500152400027622500152400027622500PriceSRAS2419350679450010382256413500ADAD124193506858000103822517018000Real GDPRecessionary GapDifference between in the equilibrium real production in short run aggregate market and also full employment occurs when in short run equilibrium real production is less than full employment. A recessionary gap associated with the business cycle contraction. This gap occurs when the short run equilibrium generate production difference from the employment level. 2 Draw a labor market then show and explain the effect of an income tax on the full-employment level of labor, the price paid by firms for workers, and the wage received by workers. (6 points)78105030480000In full employment tax impact on Firm1371600958850012763509588500WS78105020129500188595020129500101917520129500W1+122479001924050078105019240500W0A18859502508250078105025082500261937525082500W1D0D178105018669000EmploymentThe impact of tax, shift down to the demand curve from D0 to D1. After tax on firm worker receive from W0 to W1. In the term of the firm hiring to workers and cost of hiring also increase from W0 to W1 +1.85725028384500Wages received by worker after tax135255028511500150495011366500WS195250029527500274320029527500288607513335000114300013335000183832513335000W0+1S023907753054350090487530543500BW1W0952500114300027432001143100A90487511684000 W1-1D0D185725025273000E1 E0EmploymentAfter tax supply curve shift from S0 to S1 and effect occur on the employment level. Here the equilibrium level shifts from A to B. now worker increase the wages from W0 to W1. Here the total employment level decreases from the E0 to E1. 3 19907255143500019907255143500056197544767500Draw an aggregate expenditure model and show what happens when the price level increases. (Be sure to label the equilibrium both before and after)(5 points)12668259017000PriceSRASLRAS92392552705007143752540000059055013017500E312668251790700059055017907000E1E2AD3AD256197526670000AD1Y1YfGDPIn the aggregate expenditure model the SRAS curve is horizontal until reached at full employment level. After that he becomes a vertical and when the output level is less than the capacity then on point Y1. After ...