ECON222 Microeconomics 2 Assignment 7 | Liverpool
| Category | Assignment | Subject | Econimic |
|---|---|---|---|
| University | University of Liverpool (UOL) | Module Title | ECON222 Microeconomics 2 |
| Assignment No.: | 7 |
| Due date: | June 20, 2025 by 11:59pm |
ECON222 Assignment 7:
In Chapter 13, we learned that we can use the macroeconomic model to analyze the changes to real GDP (Y), unemployment (u) and price level (PL) as a result of some event.
1.Draw the macroeconomic model at equilibrium. Label the axis and curves correctly – PL, GDP, AD, SRAS, LRAS. Also, correctly label the equilibrium PL, Y* and u*. (20 Points)
2.Assume a drought severely lessens the corn harvest. Since corn has many uses including livestock feed and ethanol for gas, this drought causes
- short-term decrease in aggregate supply (SRAS). This is a negative supply shock.
- Graph the shift in the curve and the new PL, Y an U in the short-run (14 Points)
- Would a drought that negatively impacted the corn harvest increase or decrease output (Y) in the short-run? (12 points)
- Would it increase or decrease unemployment (u) in the short-run? (12 points)
- Would it increase or decrease the overall price level in the economy in the short-run?
(12 points) - What would happen to Y, u and PL in the long-run? (10 points)