« previous next »

Author Question: Suppose an economy experiences an increase in productivity. Explain both the short-run and ... (Read 132 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?

Only 12 hours after an egg cell is fertilized by a sperm cell, the egg cell starts to divide. As it continues to divide, it moves along the fallopian tube toward the uterus at about 1 inch per day.

Did you know?

The tallest man ever known was Robert Wadlow, an American, who reached the height of 8 feet 11 inches. He died at age 26 years from an infection caused by the immense weight of his body (491 pounds) and the stress on his leg bones and muscles.

Did you know?

A serious new warning has been established for pregnant women against taking ACE inhibitors during pregnancy. In the study, the risk of major birth defects in children whose mothers took ACE inhibitors during the first trimester was nearly three times higher than in children whose mothers didn't take ACE inhibitors. Physicians can prescribe alternative medications for pregnant women who have symptoms of high blood pressure.

Did you know?

For high blood pressure (hypertension), a new class of drug, called a vasopeptidase blocker (inhibitor), has been developed. It decreases blood pressure by simultaneously dilating the peripheral arteries and increasing the body's loss of salt.

Did you know?

In 1835 it was discovered that a disease of silkworms known as muscardine could be transferred from one silkworm to another, and was caused by a fungus.

Areas of differing productivity and diversity in a wetland. (a) Typha dominates core habitats, while Areas of differing productivity and diversity in a wetland. (a) Typha dominates core habitats, while
Mean scores for Erikson’s stage VI (Intimacy) for two cohorts. Scores for both cohorts increase ... Mean scores for Erikson’s stage VI (Intimacy) for two cohorts. Scores for both cohorts increase ...
Productivity in Selected Industries in the Early 1990s Productivity in Selected Industries in the Early 1990s
Inferring Productivity from Data on Output and Factor Accumulation Inferring Productivity from Data on Output and Factor Accumulation
Explain the assumptions that must be satisfied in order to validly use the one-way ANOVA ... Explain the assumptions that must be satisfied in order to validly use the one-way ANOVA ...
A melting profile shows the increase in UV absorption versus temperature A melting profile shows the increase in UV absorption versus temperature
Video: Medullary osmotic gradient - influencing factors

For a complete list of videos, visit our video library