(01.01–01.03, 05.06 HC) Assume that Athens and the Sparta us…

(01.01–01.03, 05.06 HC) Assume that Athens and the Sparta use equal resources to produce consumer and capital goods, as illustrated in the table below showing maximum possible production figures. Country Capital Goods Consumer Goods Athens 70 units 210 units Sparta 50 units 100 units Draw a fully labeled production possibility curve for Athens. Place capital goods on the vertical axis and consumer goods on the horizontal axis. Assume constant opportunity cost. On your graph from part (a), label an inefficient point of production I, an efficient point of production E, and an unattainable point of production U. Which country has the comparative advantage in the production of consumer goods? Explain. If Athens shifted from producing 50 units of capital goods and 60 units of consumer goods to producing 60 units of capital goods and 30 units of consumer goods, what would be the impact on its economic growth in the long run? Based on the data table, what range of capital goods could be traded for 60 units of consumer goods that would be mutually beneficial?

(04.06 MC) Assume that an economy is going through a slump a…

(04.06 MC) Assume that an economy is going through a slump and is experiencing less than ideal output levels and a decreased national income. In a banking system with limited reserves, which one of the following actions can a central bank take in order to fix the economy?

(03.01–03.08, 04.07 HC) A country is operating below full em…

(03.01–03.08, 04.07 HC) A country is operating below full employment. Illustrate this economy on a fully-labeled aggregate demand—aggregate supply model. Include aggregate demand, short-run aggregate supply, and long-run aggregate supply. Label the short-run equilibrium price PE and the short-run equilibrium output YE. Label the full-employment level of output YF. If the government and central bank do not intervene, how would this economy adjust in the long run? Explain. Illustrate the process of part (b) on your graph from part (a). The government decides to use fiscal policy to correct the economic situation in part (a). Assume the difference between the short-run and long-run equilibrium output is worth $80 billion, and the marginal propensity to consume is 0.9. Calculate one specific and effective fiscal policy action the government could take. What would be the short-run impact of the government’s action on the aggregate price level? What would be the short-run impact of the government’s action on the potential output of the economy? Will the long-run equilibrium price level if the government intervenes be less than, equal to, or greater than the long-run equilibrium price level without intervention? Show the impact of the government intervention from part (d) on the equilibrium real interest rate on a fully labeled loanable funds market graph. Will the long-run aggregate supply curve move as a result of the change from part (h)? Explain.