Question

Bangladesh economy is in long run
equilibrium. Suppose there is a
recession in Japan, which is a trading
partner of Bangladesh. Explain with
AD-AS model how will this affect the
equilibrium in Bangladesh and how
can the economy reach long-run
equilibrium.

Answer 1

Answer:

Initially, an economy is in long-run equilibrium with a real GDP of $4 trillion. Suppose that the productive capacity of the economy increases by 50% and at the same time, the money supply increases at the same rate. Using the line drawing tool (possibly twice), show the effect on the economy. Properly label your new line.

Explanation: