Term assigement Case Study Example | Topics and Well Written Essays - 750 words

Term assigement - Case Study Example2. Assume the Qatari government is pursue an expansionary financial policy by increasing government purchases. Show the short safari and extensive authorize impact of this policy on the macroeconomic equilibrium point victimization AD and AS impersonate (assume that Qatars economy initially operates at the potential take of GDP). You need to draw a chart and briefly explain the short run and long run impact of this expansionary fiscal policy.Pursuing an expansionary fiscal policy with the increase of government purchases will increase budget deficit or small budget surplus. The Qatari fiscal budget will be affected by the policy through its spending and taxes. It will also address the business cycle instability that gives rise to unemployment. This is called closing the recessionary transgress. The aggregate market illustrates the recessionary gap as well as the short run and the long run effects of this policy.SRAS is the short run aggr egate supply curve. Equilibrium in the short run occurs when price level and sincere production corresponds to the intersection of the SRAS and the aggregate involve curve. Short run real production is therefore less than full employment production and their difference is the recessionary gap.The recessionary gap is what the increase in purchases or expansionary fiscal policy is designed to close. This happens when there is a rightward shift of the demand curve. It will therefore increase demand and employment in the short run but non necessary in the long run. This is shown below.3.In December 2014, the international price of oil has take downped to almost half of its level in June 2014. What do you think the expected impact of this drop on the US economy using the AD and AS model? Hint Think of the impact on aggregate supply in the US and assume that the US economy initially operates at the potential GDP level.If the prices of oil drop by half, oil producers will decrease prod uction in