LO5e-ADAS model QUESTION5 10 MARKS For each of the following three (3) situations below, using a separate AD/AS diagram for each situation: 1) Show the effect on a diagram-1 or 2 marks. 3) Explain your reasoning (where appropriate you must use the AD formula in your 2) Describe the impact i.e. explain the diagram-GDP &GPL-1 mak explanation)-1 mark. As a starting point have AD intersect AS in the Keynesian range Ceteris paribus applies to each situation. (1 mark deducted if starting point is wrong) Read the following passage and then answer the questions that follow Economic rumble set to ripple out from quake-shattered Canterbury Statements have been made this week-considered iresponsible by many economists-that Canterbury’s earthquake will be good for the economy. This is based on the assumption that a rebound in retail spending to replace lost material possessions will occur. Economist Paul Dalziel gets straight to the point: “The first thing to say is we have lost a substantial amount of wealth. We have lost our physical capital. On a national level there is a negative impact and at local level an intensely negative impat. Economist Shamubeel Eaqub says up to 30 percent of small businesses may fail following a natural disaster DominionPost.(11 September, 2010).BusinessDay B7 Answer the following questions a) The claim has been made that the eart or the economy’. For the shor-term only, show 3 marks) b) Dalziel disagrees with the assessment that the earthquake will be good for the economy. For the shot-term only, show, describe and explain why Dalziel considers the earthquake an economic setback. (3 marks) The earthquake will result in considerable capital investment. Show, describe and explain both the short term and long term impacts. c) 4 marks) Note: You willose 1-mark t you do not start on the Keynesian range of the AD curve. Remember to property label l diagrams, and to show, describe and explain. No marks will be awarded for diagrams unless both description and explanation are provided and at least one is correct. For each diagram not labelled correctly, a maximum of 1-mark will be deducted
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