how does an unsloping aggregate supply curve weakens the realized multiplier effect from an initial 1 answer below »

1. Explain how an up sloping aggregate supply curve weakens
the realized multiplier effect.
2. Why does a reduction in aggregate demand reduce real
output, rather than the price level? Why might a full-strength
multiplier apply to a decrease in aggregate demand?
3. Explain: “Unemployment can be caused by a decrease of
aggregate demand or a decrease of aggregate supply.” In
each case, specify the price-level outcomes.
4. Use shifts of the AD and AS curves to explain (a) the U.S.
experience of strong economic growth, full employment,
and price stability in the late 1990s and early 2000s and (b)
how a strong negative wealth effect from, say, a precipitous
drop in the stock market could cause a recession even
though productivity is surging.

 

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