Business, 20.03.2020 10:06 jayy2x41

Use the aggregate demand/aggregate supply framework to answer the following questions:

(a) A sharp decline in the stock market due to an increase in corporate bankruptcies leads to a decline in consumer and business conﬁdence. What eﬀect would you expect this shock to have on output and inﬂation in the short-run?
(b) The US government decides to lower military expenditures to reduce the budget deﬁcit. What eﬀect would you expect this shock to have on output and inﬂation in the shortrun?
(c) State and local governments increase infrastructure spending on highways and bridges boosting potential output. What eﬀect does this shock have on output and inﬂation in the short-run? What eﬀect does this shock have on output and the inﬂation in the long-run if monetary policy does not respond?
(d) A surge in violence in the Mideast causes a temporary spike in global oil prices. What eﬀect would you expect this shock to have on output and inﬂation in the short-run?
(e) A temporary tax rebate is enacted by Congress in an eﬀort to boost reelection prospects. What eﬀect would you expect this shock to have on output and inﬂation in the shortrun?

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Use the aggregate demand/aggregate supply framework to answer the following questions:

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