I ONLY NEED HELP WITH 6-10!!! The United States economy is
experiencing a moderate economic downturn. The Republican President
has addressed the downturn using stereotypical Republican methods.
The economy failed to improve significantly, although there WAS
some improvement. During the next election, the American electorate
felt that it was time for a change in the way Washington was
handling our economy and elected a Democratic President. This new
President approached our country’s macroeconomic instability in a
stereotypical Democratic manner. This new economic policy did not
significantly improve the economy either and the American
electorate is extremely unhappy. YOU are running for President of
the United States as an Independent candidate so that you are not
forced into adopting an economic policy based on partisan
reasoning. Assuming that you are very charismatic and can get all
branches and agencies of government to enact your policies, how
would YOU address the problems? Please explain and use graphs to
illustrate the following:
6. Illustrate and explain the results of the Democrat’s policy
on AD, AS, and GDP.
7. Illustrate and explain the macroeconomic problem YOU are
facing as you took office.
8. What policy did YOU use to address the issue?
9. Illustrate and explain the results of YOUR policy on AD, AS,
10. Explain why YOUR policy worked when the other policies did
1) A moderate economic downturn means a recessionary trend .
Which means lack of demand in the economy . This can be shown by
2) The Republican President raised the government expenditure to
battle lack of demand in the economy .
3) As government expenditure rises , demand rises , this will
raise the price level . Ad curve shifts right . AS curve also
shifts showing increase in supply but not in short run because in
short run we assume production capacity is fixed . So prices will
rise in response . GDP will grow but not much since other variables
in national income analysis like consumption may fall due to rise
of prices .
4) Democratic President faces the problem of lack of consumption
in the economy due to rise in price by government expenditure and
low supply increase in short run .
5) This President may reduce tax rate to boost up personal
consumption but that would again lead to budget deficit of the
The best way would be to increase investment by cutting down
interest rates . That raises investment demand , rise of production
or supply , employment generation and also rise in total demand in
the economy .
Show transcribed image text PL AS rec. fe AS AD AD read GDP ong run sr short run
PL AS rec. fe AS AD AD read GDP ong run sr short run