Economics help for MBA

Discussion in 'Economics' started by leilanikiri, Apr 3, 2011.

  1. Since the end of World War II, the U.S. has almost always had rising prices and an upward trend in real GDP. To explain this

    a. both aggregate demand and long-run aggregate supply must be shifting right and aggregate demand must shift farther.

    b. it is only necessary that aggregate demand shifts right over time.

    c. it is only necessary that long-run aggregate supply shifts right over time.

    d. None of the above cases would produce rising prices and growing real GDP over time.
  2. I think A would give you the correct answer for the test.

    But in real life it non of those choices are the correct answer.
  3. I assume you're refering to the AS-Ad model. B is the correct answer then.
  4. .......There will not be anybody else to do your "homework". :(
  5. Clearly, we're referring to the short run, and for that reason the correct answer is (a).

    AD shift to the right for obvious reasons (higher government injections- of course, this will drown out consumption and investment in the long run to maintain equilibrium).

    AS shifts to the right as there was a massive improvement in technologically driven productivity during WW2.

    Thus, in order for the price level to increase, AD has to shit to right in greater quantity that a shit to the right in AS.

    Care to explain?
  6. Two things are happening at the same time. GDP is rising and prices are also rising. In other words, inflation is taking place.

    According to Keynesian economics this can only happen because AD is rising FASTER than AS.

    There is no such thing as AD and AS. The economy works just like a Balance Sheet. Debits must equals credits in all circumstances.

    AD and AS is a failed way to rename debits and credits.

    In economics we are all buyers and sellers. You cant put all buyers and all sellers in two different groups.

    Water is H2O right?? Separate them and you dont have water anymore. :D
  7. 1. After WWII, we had real GDP growth as we were "making things and selling to the world".

    2. For the last 20-30 years, all we've really had is money-pump inflation.
  8. I couldn't disagree more. Balance sheets are nothing short of alchemy, and to say that the simple macro model is equivalent to debit and credit is quite far-fetched. Through your analogy, I can see some relevance to basic GDP accounting, yet after that, there exists pure divergence. Perhaps you're suggesting that an inflationary gap bears the same qualities as credit, while a recessionary gap represents debit. Frankly, I hate accounting.

    If you're implying that short run shocks such as the one illustrated above have little contingency over the long-run since variables "balance" in the long run, then I do agree with you.