Economys production possibilities Essay Example for Free

Economys production possibilities EssayProblem Set 2 bang all questions listed below. Clearly label your answers 1. What impact would a change that shifts an economys production possibilities curve outward have on the long run aggregate tack on curve? How have improvements in computer technology affected production possibilities and the long run aggregate supply curve? ExplainAnswer produce of population and the labor-force participation rateCapital accumulationImprovements in technology2. Construct the AD, SRAS, and LRAS curves for an economy experiencing (a) full employment, (b) an economic boom, and (c) a recession. (Graphs can be flock drawn or done by computer label all curves and axes clearly.)a=full employment b=boom c= recession3. What is a work out deficit? How are cypher deficits financed? Why do Keynesians mean that budget deficits will increase aggregate demand?Answer A budget deficit occurs when the government spending exceeds government revenue in a given tim e period, usually one year. Budget deficits are financed by a countrys bonds. In the U.S., its financed by Treasury bills, notes and bonds. This is the governments way of printing money. Actually, it is creating more credit denominated in that countrys currency. However, it has the same effect it lowers the value of that countrys currency. As bonds flood the market, the supply outweighs the demand. The Keynesians believe that when aggregated demand exceeds productive capacity of the economy, the federal government can prevent inflationary overheating by reducing demand with a budget surplus generated by a combination of less spending and higher taxes.4. When output and employment slowed in early 2008, the Bush Administration and the Democratic relation passed a legislation sending households a checkfor $600 for each adult (and $300 per child). These checks were financed by borrowing. Would a Keynesian favor this action? Why or why not?Answer No, the Keynesian would not agree with t his action because their opinion is generating a combination of less spending and higher taxes, not self-aggrandising away money.