« previous next »

Author Question: Suppose an economy experiences an increase in productivity. Explain both the short-run and ... (Read 83 times)

madam-professor

  • Hero Member
  • *****
  • Posts: 584
on: Jun 30, 2018
Suppose an economy experiences an increase in productivity. Explain both the short-run and medium-run effects of this increase in productivity on output, employment, and the unemployment rate.
 
  What will be an ideal response?

Question 2

Graphically illustrate and explain what effect an increase in real income will have on the money market.
 
  What will be an ideal response?


Brummell1998

  • Sr. Member
  • ****
  • Posts: 324
Reply #1 on: Jun 30, 2018
Answer to Question 1

In both the short run and medium run, TP will cause an increase in output (assuming, of course, that any change in AD, if it occurs, is offset by the shift in the AS curve). What happens to employment in the medium? Given that Y will rise by the full change in TP in the medium, we know that N and u will not be affected in the medium run. In the short run, N will rise and u will fall if the percentage change in Y is greater than the percentage change in TP.

Answer to Question 2

An increase in income will cause an increase in transactions and an increase in money demand. The money demand curve will shift to the right causing an excess demand for money and excess demand for bonds. The interest rate will rise to restore money market equilibrium. There is no change in money supply as a result of this.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question

madam-professor

  • Hero Member
  • *****
  • Posts: 584
Reply #2 on: Jun 30, 2018
Thank you :)


Brummell1998

  • Sr. Member
  • ****
  • Posts: 324
Reply #3 on: Jun 30, 2018
Happy to help you


« previous next »
 

Did you know?

There are more sensory neurons in the tongue than in any other part of the body.

Did you know?

Stroke kills people from all ethnic backgrounds, but the people at highest risk for fatal strokes are: black men, black women, Asian men, white men, and white women.

Did you know?

A good example of polar molecules can be understood when trying to make a cake. If water and oil are required, they will not mix together. If you put them into a measuring cup, the oil will rise to the top while the water remains on the bottom.

Did you know?

Signs and symptoms that may signify an eye tumor include general blurred vision, bulging eye(s), double vision, a sensation of a foreign body in the eye(s), iris defects, limited ability to move the eyelid(s), limited ability to move the eye(s), pain or discomfort in or around the eyes or eyelids, red or pink eyes, white or cloud spots on the eye(s), colored spots on the eyelid(s), swelling around the eyes, swollen eyelid(s), and general vision loss.

Did you know?

It is widely believed that giving a daily oral dose of aspirin to heart attack patients improves their chances of survival because the aspirin blocks the formation of new blood clots.

Primary production increases with an increase in total phosphorus concentration. Primary production increases with an increase in total phosphorus concentration.
Many diesel fuel additives increase the cetane rating which results in improved fuel economy. Many diesel fuel additives increase the cetane rating which results in improved fuel economy.
Atmospheric pressure decreases with increase in altitude. Atmospheric pressure decreases with increase in altitude.
U.S. Output and Productivity Growth, 1870–2007 U.S. Output and Productivity Growth, 1870–2007
Role of Productivity in Determining Output per Worker, 2009 Role of Productivity in Determining Output per Worker, 2009
Experiments showing that long- or short-day plants flower in response to night length. Each horizont Experiments showing that long- or short-day plants flower in response to night length. Each horizont
Video: Carbohydrate Metabolism: Introduction to renal processes and filtrate formation and composition

For a complete list of videos, visit our video library