Description
Purpose of Assignment
Students will example the model economists use to analyze the economy's short-run fluctuations--the model of aggregate demand and aggregate supply. Students will learn about some of the sources for shifts in the aggregate-demand curve and the aggregate-supply curve and how these shifts can cause fluctuations in output. Students will be introduced to actions policymakers might undertake to offset such fluctuations. Students will see why there is a temporary trade-off between inflation and unemployment, and why there is no permanent trade-off.
Assignment Steps
Resources: National Bureau of Economic Research
Select an organization your team is familiar with or an organization where a team member currently works.
Create a 15- to 20-slide Microsoft® PowerPoint® presentation to present to the organization's Executive Committee.
Include the following items:
- Identify the three key facts about short-run economic fluctuations and how the economy in the short run differs from the economy in the long run.
- Explain economic fluctuations and how shifts in either aggregate demand or aggregate supply can cause booms and recessions using the model of aggregate demand and aggregate supply.
- Explain how monetary policy affects interest rates and aggregate demand.
- Analyze how fiscal policy affects interest rates and aggregate demand.
- Evaluate why policymakers face a short-run trade-off between inflation and unemployment.
- Evaluate why the inflation-unemployment trade-off disappears in the long run.
Format your paper consistent with APA guidelines.
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Explanation & Answer
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FORD MOTOR
COMPANY
SHORT RUN ECONOMIC
FLUCTUATIONS
Student’s Name
Professor’s Name
Course Title
Date
INTRODUCTION
Ford motor company is a firm that operates in the automobile
industry
The economic activity of the company, just like any other’s
undergoes fluctuations from one year to another.
Over time, the production of automobiles has increased due
to a rise in the capital stock, the labor force, and advanced
technology, this growth in the economy allows for people to
enjoy high living standards.
The model of aggregate demand and aggregate supply is
used in analyzing short run fluctuations in the economy.
SHORT-RUN ECONOMIC FLUCTUATIONS
Economic
activities fluctuate every year i.e.
The
production of motor vehicles goes up in most years.
During certain years, when normal growth does not take place,
a recession takes place
The production of motor vehicles in the economy of the United
States has risen by approximately 3 percent every year.
A
recession refers to a duration where the real GDP
declines, incomes fall, and unemployment rises.
A depression occurs as a result of severe recession
(Friedman & Vandersteel, 1982)
SHORT RUN VS LONG RUN
SHORT RUN
Labor
quantity is variable
but production processes
and capital quantity are
fixed.
Fixed costs are usually
already covered and thus
unrecoverable or “sunk”
LONG RUN
The labor quantity, processes
of production, and the
capital quantity in the
company are all variable.
The fixed costs have not
been decided yet and not
paid, thus...