Chapter 1 57.What is the difference between recession and de.docxsleeperharwell
Chapter 1
57.
What is the difference between recession and depression in an economy? Provide an example of depression from the real world that has hit the global economy.
Use the following to answer question 58:
Answer: When there is a mild fall in the gross domestic product (GDP) of an economy over a period of time it leads to recession in the economy. If the intensity of the fall in GDP is severe over a period of time, then it turns into a depression. Recession is cyclic in nature; that is, it repeats itself over a period of time in an economy. A famous example of depression is that of the Great Depression of the 1930s that occurred in the United States and affected the global economy. Even the financial crisis of 2008-2009 in the United States was very much reminiscent of the Great Depression.
58.
Refer to the following graph and identify the years for which Country A and Country B experienced recession.
Country A experienced its recession during 2003 and its early recovery during 2004. Country B experienced its first recession during 2002 and its early recovery in 2003. Country B experienced a second recession in 2007.
59.
Why do we call macroeconomics an imperfect science? Explain.
The study of macroeconomics depends mainly upon the historical data on different economies. Macroeconomists analyze these data to explain changes occurring in different economic parameters (income, prices, unemployment, etc.) and formulate policies. Additionally, macroeconomic studies cannot be conducted in controlled experiments, as in biology or chemistry, for example. In this way, macroeconomists are similar to weather forecasters.
60.
Are the terms “market clearing” and “equilibrium” one and the same? Explain.
Yes, both terms represent the same notion: the balance between supply and demand. It is the balancing point at which everything that is produced gets sold and fulfills the entire demand. Thus, if all other things remain constant, then there is no tendency to change the quantity supplied and demanded at this point.
61.
Do you agree with the statement, “macroeconomics rests on the foundation of microeconomics”? Explain.
Macroeconomics involves studying the aggregate of economic variables related to individual decision making parameters, which are microeconomic (think of individuals' expenses, investments, etc.). That is to say, the total expenditure in an economy is the aggregate (sum) of all the expenditures done by all consumers in that economy, or the total investment done in an economy is the aggregate (sum) of all individual investments done by firms in that economy. This reflects that macroeconomic study rests on the foundation of microeconomics.
62.
Give two examples of macroeconomic variables and microeconomic variables.
The income of your father is a microeconomic variable, while the gross domestic product (GDP) of your country is a macroeconomic variable. The money your father saves in the bank is a microeconomic va.
Chapter 1 57.What is the difference between recession and de.docxsleeperharwell
Chapter 1
57.
What is the difference between recession and depression in an economy? Provide an example of depression from the real world that has hit the global economy.
Use the following to answer question 58:
Answer: When there is a mild fall in the gross domestic product (GDP) of an economy over a period of time it leads to recession in the economy. If the intensity of the fall in GDP is severe over a period of time, then it turns into a depression. Recession is cyclic in nature; that is, it repeats itself over a period of time in an economy. A famous example of depression is that of the Great Depression of the 1930s that occurred in the United States and affected the global economy. Even the financial crisis of 2008-2009 in the United States was very much reminiscent of the Great Depression.
58.
Refer to the following graph and identify the years for which Country A and Country B experienced recession.
Country A experienced its recession during 2003 and its early recovery during 2004. Country B experienced its first recession during 2002 and its early recovery in 2003. Country B experienced a second recession in 2007.
59.
Why do we call macroeconomics an imperfect science? Explain.
The study of macroeconomics depends mainly upon the historical data on different economies. Macroeconomists analyze these data to explain changes occurring in different economic parameters (income, prices, unemployment, etc.) and formulate policies. Additionally, macroeconomic studies cannot be conducted in controlled experiments, as in biology or chemistry, for example. In this way, macroeconomists are similar to weather forecasters.
60.
Are the terms “market clearing” and “equilibrium” one and the same? Explain.
Yes, both terms represent the same notion: the balance between supply and demand. It is the balancing point at which everything that is produced gets sold and fulfills the entire demand. Thus, if all other things remain constant, then there is no tendency to change the quantity supplied and demanded at this point.
61.
Do you agree with the statement, “macroeconomics rests on the foundation of microeconomics”? Explain.
Macroeconomics involves studying the aggregate of economic variables related to individual decision making parameters, which are microeconomic (think of individuals' expenses, investments, etc.). That is to say, the total expenditure in an economy is the aggregate (sum) of all the expenditures done by all consumers in that economy, or the total investment done in an economy is the aggregate (sum) of all individual investments done by firms in that economy. This reflects that macroeconomic study rests on the foundation of microeconomics.
62.
Give two examples of macroeconomic variables and microeconomic variables.
The income of your father is a microeconomic variable, while the gross domestic product (GDP) of your country is a macroeconomic variable. The money your father saves in the bank is a microeconomic va.
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
The Evolution of Non-Banking Financial Companies (NBFCs) in India: Challenges...beulahfernandes8
Role in Financial System
NBFCs are critical in bridging the financial inclusion gap.
They provide specialized financial services that cater to segments often neglected by traditional banks.
Economic Impact
NBFCs contribute significantly to India's GDP.
They support sectors like micro, small, and medium enterprises (MSMEs), housing finance, and personal loans.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
The new type of smart, sustainable entrepreneurship and the next day | Europe...
CH 1.1 AD & AS.ppt
1. Aggregate demand and Aggregate
supply
Assoc. Prof Dr. Ergin AKALPLER
erginakalpler@csu.edu.tr
eakalpler@gmail.com
2. THREE KEY FACTS ABOUT
ECONOMIC FLUCTUATIONS
1. Economic fluctuations are irregular and
unpredictable.
Fluctuations in the economy are often called the
business cycle.
These fluctuations do not follow regular or easily
predictable patterns.
3. Figure 1 A Look At Short-Run
Economic Fluctuations
(a) Real GDP
Billions of
2000 Dollars
1965 1970 1975 1980 1985 1990 1995 2000 2005
2,000
4,000
6,000
8,000
$10,000
3,000
5,000
7,000
9,000
Real GDP
4. THREE KEY FACTS ABOUT ECONOMIC
FLUCTUATIONS
2. Most macroeconomic variables fluctuate together.
Most macroeconomic variables that measure some
type of income or production fluctuate closely
together.
Although many macroeconomic variables fluctuate
together, they fluctuate by different amounts.
6. THREE KEY FACTS ABOUT ECONOMIC
FLUCTUATIONS
3. As output falls, unemployment rises.
Changes in real GDP are inversely related to changes in the unemployment
rate.
During times of recession, unemployment rises substantially.
7. Figure 1 A Look At Short-Run
Economic Fluctuations
(c) Unemployment Rate
1965 1970 1975 1980 1985 1990 1995 2000 2005
Percent of
Labor Force
2
4
6
8
10
12%
Unemployment
Rate
9. EXPLAINING SHORT-RUN ECONOMIC
FLUCTUATIONS
If the quantity of money in the economy were to
double, prices would double (inflation) and so would
incomes. Real variables would remain constant.
HOWEVER: These changes will not occur
instantaneously. It takes time for prices and incomes to
change, and in the meantime, there can be real
effects.
10. Resource transfer
Welfare will decrease and producer
gain supposed to be increased This
so called resource transfers from
consumers to producers.
13. The Model of Aggregate Demand
and Aggregate Supply
Two variables are used to develop a
model to analyze the short-run
fluctuations.
The economy’s output of goods and
services measured by real GDP.
The average level of prices measured by
the CPI or the GDP deflator.
14. Short run production
The short run, as it applies to business,
states that at a certain point in the future,
one or more inputs will be fixed, while
others are variable.
When it relates to economics, the short run
speaks to the idea that an economy's
behavior will vary based on how much time it
has to absorb and react to stimuli.
The short run's counterpart is the long run,
which contains no fixed costs. Instead, costs
balance out with the desired amount of costs
available at the lowest possible price.
15. The Model of Aggregate Demand
and Aggregate Supply
Economist use the model of aggregate demand and
aggregate supply to explain short-run fluctuations in
economic activity around its long-run trend.
Time
Economic
activity
Business
cycle
16. The Model of Aggregate Demand
and Aggregate Supply
The aggregate-demand curve shows the
quantity of goods and services that households,
firms, and the government want to buy at each
price level.
The aggregate-supply curve shows the quantity
of goods and services that firms choose to
produce and sell at each price level.
19. Aggregate demand
Aggregate demand is made up of household or
consumer spending (C),
business investment (I),
government spending (G)
and net exports (NX).
It is about the spending decisions of households, firms
and government
20. THE AGGREGATE-DEMAND
CURVE
The four components of GDP (Y)
contribute to the aggregate demand
for goods and services.
Y = C + I + G + NX
21. Components of the GDP
Y= C+G+I+NX
Y= output , C=Consumption, G=gov spending
NX=Export-Import
The model will attempt to capture the essence or
most important features of the process.
The economic decisions that we will consider will
involve static and inter-temporal choice
22. Figure 3 The Aggregate-Demand Curve...
Quantity of
Output
Price
Level
0
Aggregate
demand
P
Y Y2
P2
1. A decrease
in the price
level . . .
2. . . . increases the quantity of
goods and services demanded.
23. Why the Aggregate-Demand
Curve Is Downward Sloping
The Price Level and Consumption:
The Wealth Effect
The Price Level and Investment:
The Interest Rate Effect
The Price Level and Net Exports:
The Exchange-Rate Effect
24. Why the Aggregate-Demand
Curve Is Downward Sloping
The Price Level and Consumption:
The Wealth Effect
A lower price level raises the real
value of money and makes
consumers wealthier, which
encourages them to spend more.
This increase in consumer spending
means larger quantities of goods
and services demanded.
25. Why the Aggregate-Demand
Curve Is Downward Sloping
The Price Level and Investment:
The Interest Rate Effect
A lower price level reduces the interest rate
and makes borrowing less expensive, which
encourages greater spending on investment
goods.
This increase in investment spending means
a larger quantity of goods and services
demanded.
26. Why the Aggregate-Demand
Curve Is Downward Sloping
The Price Level and Net Exports:
The Exchange-Rate Effect
A lower price level in the U.S. causes U.S.
interest rates to fall and the real exchange
rate to depreciate, which stimulates U.S. net
exports.
The increase in net export spending means a
larger quantity of goods and services
demanded.
27. Why the Aggregate-Demand
Curve Might Shift
The downward slope of the aggregate-demand
curve shows that a fall in the price level raises
the overall quantity of goods and services
demanded.
Many other factors, however, affect the
quantity of goods and services demanded at any
given price level.
When one of these other factors changes, the
aggregate demand curve shifts.
28. Why the Aggregate-Demand
Curve Might Shift
Shifts might arise from changes in:
Consumption
Investment
Government Purchases
Net Exports
29. Shifts in the Aggregate Demand
Curve
Quantity of
Output
Price
Level
0
Aggregate
demand, D1
P1
Y1
D2
Y2
31. THE AGGREGATE-SUPPLY
CURVE
In the long run, the aggregate-supply curve
is vertical because the price level does not
affect long run determinants of real GDP.
In the short run, the aggregate-supply
curve is upward sloping.
32. THE AGGREGATE-SUPPLY
CURVE
In the long run, an economy’s production of goods
and services depends on its supplies of labor,
capital, and natural resources and on the available
technology used to turn these factors of production
into goods and services.
The price level does not affect these variables in
the long run.
The long-run aggregate supply represents the
classical dichotomy and money neutrality.
33. Figure 4 The Long-Run
Aggregate-Supply Curve
Quantity of
Output
Natural rate
of output
Price
Level
0
Long-run
aggregate
supply
P2
1. A change
in the price
level . . .
2. . . . does not affect
the quantity of goods
and services supplied
in the long run.
P
34. THE AGGREGATE-SUPPLY
CURVE
The long-run aggregate-supply curve is vertical at
the natural rate of output, which is the production
of goods and services that an economy achieves in
the long run when unemployment is at its normal
rate.
This level of production is also referred to as
potential output or full-employment output.
The natural rate of output is level of output
towards which the economy gravitates in the long
run.
35. Why the Long-Run Aggregate-
Supply Curve Might Shift
Any change in the economy that alters the natural
rate of output shifts the long-run aggregate-
supply curve.
The shifts may be categorized according to the
various factors in the classical model that affect
output.
36. Why the Long-Run Aggregate-
Supply Curve Might Shift
Shifts might arise from changes in:
Labor -L
Capital -K
Natural Resources –N
Technological Knowledge –H goes to
available techno and know how
Y= A f(KLMN) ----production function
37. Figure 5 Long-Run Growth and Inflation
Quantity of
Output
Y1980
AD1980
AD1990
Aggregate
Demand, AD2000
Price
Level
0
Long-run
aggregate
supply,
LRAS1980
Y1990
LRAS1990
Y2000
LRAS2000
P1980
1. In the long run,
TkLM or technological
progress or others shifts
long-run aggregate
supply . . .
4. . . . and
ongoing inflation.
3. . . . leading to growth
in output . . .
P1990
P2000
2. . . . and growth in the
money supply results of cons, invest
exp or gov exp shifts
A ggregate demand . . .
38. Using Aggregate Demand and Aggregate
Supply to Depict Long-Run Growth and
Inflation
The most important forces that govern the
economy and growth in the long run are
technology and monetary policy.
Short-run fluctuations in output and the price
level should be viewed as deviations from the
continuing long-run trends of output growth and
inflation.
39. Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
In the short run, an increase in the overall level
of prices in the economy tends to raise the
quantity of goods and services supplied.
A decrease in the level of prices tends to reduce
the quantity of goods and services supplied.
As a result, the short-run aggregate-supply
curve is upward sloping.
40. Figure 6 The Short-Run
Aggregate-Supply Curve
Quantity of
Output
Price
Level
0
Short-run
aggregate
supply
1. A decrease
in the price
level . . .
2. . . . reduces the quantity
of goods and services
supplied in the short run.
Y
P
Y2
P2
41. Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
Three Theories:
The Sticky-Wage Theory
The Sticky-Price Theory
The Misperceptions Theory
42. Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
The Sticky-Wage Theory
Nominal wages are slow to adjust to
changing economic conditions, or are
“sticky” in the short run
Nominal wages do not adjust immediately to
a fall in the price level. A lower price level
makes employment and production less
profitable.
This induces firms to reduce the quantity of
goods and services supplied.
43. Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
The Sticky-Price Theory
Prices of some goods and services adjust
sluggishly in response to changing economic
conditions.
An unexpected fall in the price level leaves some
firms with higher-than-desired prices. For a
variety of reasons, they may not want to or be
able to change prices immediately.
This depresses sales, which induces firms to
reduce the quantity of goods and services they
produce.
44. Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
The Misperceptions Theory
Changes in the overall price level temporarily
mislead suppliers about what is happening in
the markets in which they sell their output.
A lower price level causes misperceptions
about relative prices.
These misperceptions induce suppliers to
decrease the quantity of goods and services
supplied.
45. Why the Aggregate-Supply Curve
Slopes Upward in the Short Run
All three theories suggest that output deviates in the short run
from the natural rate when the actual price level deviates from
the price level that people had expected to prevail or maintan in
the market.
Quantity
of output
supplied
=
Natural
rate of
output
+ a
Actual
price
level
- Expected
price level
47. Why the Aggregate Supply
Curve Might Shift
An increase in the expected price level reduces
the quantity of goods and services supplied and
shifts the short-run aggregate supply curve to the
left.
A decrease in the expected price level raises the
quantity of goods and services supplied and shifts
the short-run aggregate supply curve to the right.
48. Table 2 The Short-Run Aggregate
Supply Curve: Summary
49. Figure 7 The Long-Run Equilibrium
Natural rate
of output
Quantity of
Output
Price
Level
0
Short-run
aggregate
supply
Long-run
aggregate
supply
Aggregate
demand
A
Equilibrium
price
50. TWO CAUSES OF ECONOMIC
FLUCTUATIONS
Four steps in the process of analyzing economic
fluctuations:
Determine whether the event affects aggregate supply
or aggregate demand.
Decide which direction the curve shifts.
Use a diagram to compare the initial and the new
equilibrium.
Keep track of the short and long run equilibrium, and
the transition between them.
51. TWO CAUSES OF ECONOMIC
FLUCTUATIONS
Shifts in Aggregate Demand
In the short run, shifts in aggregate demand cause
fluctuations in the economy’s output of goods and
services.
In the long run, shifts in aggregate demand affect
the overall price level but do not affect output.
Policymakers who influence aggregate demand can
potentially mitigate or reduce the severity of
economic fluctuations.
52. Figure 8 A Contraction in Aggregate
Demand
Quantity of
Output
Price
Level
0
Short-run aggregate
supply, AS
Long-run
aggregate
supply
Aggregate
demand, AD
A
P
Y
AD2
AS2
1. A decrease in
aggregate demand . . .
2. . . . causes output to fall in the short run . . .
3. . . . but over
time, the short-run
aggregate-supply
curve shifts . . .
4. . . . and output returns
to its natural rate.
C
P3
B
P2
Y2
53. TWO CAUSES OF ECONOMIC
FLUCTUATIONS
Shifts in Aggregate Supply
Consider an adverse shift in aggregate supply:
A decrease in one of the determinants of aggregate
supply shifts the curve to the left.
Output falls below the natural rate of employment.
Unemployment rises.
The price level rises.
54. Figure 10 An Adverse Shift in Aggregate
Supply
Quantity of
Output
Price
Level
0
Aggregate demand
3. . . . and
the price
level to rise.
2. . . . causes output to fall . . .
1. An adverse shift in the short-
run aggregate-supply curve . . .
Short-run
aggregate
supply, AS
Long-run
aggregate
supply
Y
A
P
AS2
B
Y2
P2
55. The Effects of a Shift in
Aggregate Supply
Adverse shifts in aggregate supply cause
stagflation -unemployment and price both
increase in phillips it is opposite price
increase reduce unemployment—a period
of recession and inflation.
Output falls and prices rise.
Policymakers who can influence aggregate
demand cannot offset both of these
adverse effects simultaneously.
56. The Effects of a Shift in
Aggregate Supply
Policy Responses to Recession
Policymakers may respond to a recession in one
of the following ways:
Do nothing and wait for prices and wages to
adjust.
Take action to increase aggregate demand by
using monetary and fiscal policy.
(Such as OMO : Expansionary money policy
Buying bonds or reduce tax to increase income)
57. Figure 11 Accommodating an
Adverse Shift in Aggregate Supply
Quantity of
Output
Natural rate
of output
Price
Level
0
Short-run
aggregate
supply, AS
Long-run
aggregate
supply
Aggregate demand, AD
P2
A
P
AS2
3. . . . which
causes the
price level
to rise
further . . .
4. . . . but keeps output
at its natural rate.
2. . . . policymakers can
accommodate the shift
by expanding aggregate
demand . . .
1. When short-run aggregate
supply falls . . .
AD2
C
P3