Sign In
Not register? Register Now!
Essay Available:
2 pages/≈550 words
4 Sources
Mathematics & Economics
Research Paper
English (U.S.)
MS Word
Total cost:
$ 11.66

Long Run Equilibrium with Full Employment (Research Paper Sample)


Long Run Equilibrium with Full Employment


Long Run Equilibrium with Full Employment
Student’s name
Professor’s name
Course title
Long run equilibrium with full employment
It occurs when marginal costs equal marginal revenue, which is equal also to total average costs. The time period when there are no production fixed variables, is known as the long-run. Demand and supply define all this.
Aggregate demand
It is an economic measurement of the amount total for all finished goods and services demand produced in an economy. Aggregate demand is expressed as the amount total of exchanged money for those goods and services at a specific level of price and point in time.
Figure 1; aggregate demand shifts to the right
output; aggregate demand shifts to the left
left351790OutputPrice Level0OutputPrice Level
Figure 2; aggregate demand shifts to the right
In figure 2, original equilibrium at point E0, during a recession, far relatively from the full level of output. The tax cut, by consumption increase, shifts to the right the AD curve. At the equilibrium new (E1), unemployment falls and real output rises, because in the diagram the economy has not reached yet to its level of output, any rise in the level of price remains muted.
Recession and full level of output in the AS/AD Model. Whether there is economy recession is illustrated in the AD/AS model by how close the equilibrium is to the output potential line as indicated by the LRAS vertical line (Gumata, 2017). In this example, the level of output Y0 at the equilibrium E0 is relatively far from the potential output line, so it can represent an economy in recession, well below the full employment level of output.
In macroeconomic analysis the short run is a period in which wages and some other prices respond not to changes in conditions of economy. In certain markets, as conditions of the economy change, prices wages may not adjust enough quickly to maintain equilibrium in these markets (Escobari, 2016). A sticky price is a slow price to adjust to its equilibrium level, creating sustained periods of shortage or surplus. Wage and price stickiness prevent the economy from achieving its natural level of employment and its potential output.
Shifts in Aggregate Demand.
An increase in government expenditure shift AD to the right. Consumer confidence increase can shift from AD0 to AD1, that is AD to the right, When the AD shifts to the right, the new equilibrium (E1) will have a higher output quantity and also a higher-level price compared with the equilibrium (E0) original. In this example, the new equilibrium (E1) is so close to potential GD

Get the Whole Paper!
Not exactly what you need?
Do you need a custom essay? Order right now:

Other Topics:

  • The role of contagion in solving sovereign Debt Crisis Economics Paper
    Description: The European community faced a trail of the economic and sovereign debt crisis from the 2007 to 2008 global financial crisis. Most countries had been experiencing healthy economies before the 2007 to 2008 debt crisis. Public debt had been reasonably growing, financial shortages were very little...
    12 pages/≈3300 words| 5 Sources | APA | Mathematics & Economics | Research Paper |
  • Country Risk Analysis Mathematics & Economics Research Paper
    Description: This report will examine political risk in the state of Libya. Libya is a North African country. Political risk involves government corruption, bureaucracy, wars, civil unrest, government attitude to foreign direct investment and multinational corporations, blockage of funds transfers from the country...
    11 pages/≈3025 words| 17 Sources | APA | Mathematics & Economics | Research Paper |
  • Country Analysis Report: China Vs. Canada Economics Paper
    Description: Economic analysis is the primary method to evaluate the performance of one country compared to another. There are two categories of economics namely microeconomics and macroeconomics. Microeconomics is concerned with the decisions made by individual economic units such as households...
    6 pages/≈1650 words| 7 Sources | APA | Mathematics & Economics | Research Paper |
Need a Custom Essay Written?
First time 15% Discount!