Economys production possibilities Essay Example for Free

Economys production possibilities EssayProblem Set 2Complete whole questions listed below. Cl aboriginal check off your answers 1. What impact would a change that shifts an economys production possibilities curve outward have on the long run heap up supply curve? How have improvements in computer technology change production possibilities and the long run aggregate supply curve? ExplainAnswer Growth of nation 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 sparing boom, and (c) a recession. (Graphs can be hand drawn or done by computer label all curves and axes clearly.)a=full employment b=boom c= recession3. What is a budget deficit? How are budget deficits financed? Why do Keynesians believe that budget deficits will increase aggregate demand?Answer A budget deficit occurs when the political science spending exceeds government revenue in a given time 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 entertain 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 intemperance generated by a combination of slight spending and higher taxes.4. When output and employment slowed in early 2008, the Bush Administration and the Democratic Congress passed a legislation sending households a checkfor $600 for apiece adult (and $300 per child). These checks were financed by borrowing. Would a Keynesian favor this action? Why or why not?Answer No, the Keyn esian would not agree with this action because their opinion is generating a combination of less spending and higher taxes, not giving away money.