Use the as/ad model to describe the effect of each of the following events on the economy of snezhanka (a fictitious nation). beginning with the economy in equilibrium carefully show the shift involved and the new equilibrium. state whether the p (price level) and rgdp at the new equilibrium are higher or lower. for each part of this question, start again at the original equilibrium. what will happen if:

a. taxes on households are decreased?
b. taxes paid by firms are decreased?
c. the value of the national currency, the snezhankan lev, declines in the international currency market?
d. a revolutionary new machine, the aparat, increases worker productivity?

Question

justinliriano1911 justinliriano1911

11-07-2022
Business

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Use the as/ad model to describe the effect of each of the following events on the economy of snezhanka (a fictitious nation). beginning with the economy in equilibrium carefully show the shift involved and the new equilibrium. state whether the p (price level) and rgdp at the new equilibrium are higher or lower. for each part of this question, start again at the original equilibrium. what will happen if:

a. taxes on households are decreased?
b. taxes paid by firms are decreased?
c. the value of the national currency, the snezhankan lev, declines in the international currency market?
d. a revolutionary new machine, the aparat, increases worker productivity?

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ogorwyne ogorwyne · Answer 1 · 2022-07-13T19:11:36+02:00

The following would happen

Aggregate income would increase for households. They would have a rise in output.

taxes on households are decreased

When the taxes are decreased, the households would have a rise in their purchasing power. Their output would go up form q to q2.

taxes paid by firms are decreased

The cost of the firms production is going to fall. The firm would then be able to raise their production hence increasing their supply. Output would rise and price level would fall.

the value of the national currency, the snezhankan lev, declines in the international currency market?

If the value of the currency should fall, then it would cause the demand for foreign goods to rise then there would be a new equilibrium in the market.

a revolutionary new machine, the apparat, increases worker productivity

An increase in productivity would raise supply for the producer hence bringing about a new rise in the price level.

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