Question: Queston 45 Not yet answered Points out of 6.00 Y Flag In October, the US faced a government shutd…

02 May Question: Queston 45 Not yet answered Points out of 6.00 Y Flag In October, the US faced a government shutd…

Posted at 05:30h in 2Past Paper by Exams

Queston 45 Not yet answered Points out of 6.00 Y Flag In October, the US faced a government shutdown as a result of the political stalemate in Washington associated with the funding of the Affordable Care Act. The result of the situation in October was to pass a temporary increase in government spending and revisit the discussion in February of this year Suppose this past February that the debt ceiling negotiations were unsuccessful resulting in another govemment shutdown that resulted in a decrease in government spending (this is not what happened, but work with me herel). Beginning in the long-run equilibrium in the AD/AS Model (no need to focus on the money market here), explain and demonstrate the impact of this decrease in the short run Assuming that the Govemment and Federal Reserve do NOT respond to this shock, how does the economy return to its long-run equilibrium (graph and explain)?

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