Economics Assignment: AD-AS Model Analysis and Policy Impacts

This economics assignment analyzes the Aggregate Demand-Aggregate Supply (AD-AS) model to assess the impact of various economic scenarios and policy changes. The assignment examines how shifts in the AD and AS curves affect equilibrium price and real GDP. The scenarios include the impact of increased import costs, changes in export demand, government power generation, oil price fluctuations, and immigration intake. For each scenario, the assignment illustrates the shift in the AD or AS curve, providing analysis on the resulting changes in price and output. The assignment references several economic texts and journals to support the analysis, providing a comprehensive understanding of the model's application in different economic situations.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the student:
Name of the University:
Author note

1ECONOMICS ASSIGNMENT
Table of Contents
a:......................................................................................................................................................2
b:......................................................................................................................................................3
c:......................................................................................................................................................3
d:......................................................................................................................................................4
e:......................................................................................................................................................5
Reference:........................................................................................................................................7

2ECONOMICS ASSIGNMENT
a:
Considering the given scenario it can be entailed that it would increase the cost of the
importable in the Indian market and on the other hand due to the fall in the export, price of the
chickpea will fall in the domestic market (Friedman, 2017).
Figure 1: Shift of the AD-AS curve due to policy change
Source: (Created by Author)
As it can be seen from the figure 1 that if there is rise in the price of the importable, then
there will be fall in the demand, leading to shift of the Aggregate Demand (AD) curve from AD0
to AD1 (Kilian & Murphy, 2014). Considering the fact that there will no change in the supply,
Aggregate Supply (AS), the price will fall with the change in the demand. New equilibrium price
will be P1 and the demand will be Y1. Thus, it will create an Y1Y0 amount of real GDP fall and
the price will also fall by P0P1.

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b:
With rise in the demand of the Australian wine in china, there will be shift in the demand
of the same. As it can be seen from the figure 2, with rise in the demand, AD0 will shift to AD1,
which represents the rise in the demand of the same.
Figure 2: Shift of the AD-AS curve due to policy change
Source: (Created by Author)
Considering there will be no change in the supply due to rise in demand, price will
increase from P0 to P1 and the quantity demanded will be Y0 from Y1. Under this situation,
Y1Y0 will be the rise in the real GDP and the price change will be P0P1 (Gilboy, 2017).
c:
If the government increase power generation, then it will increase the output capability of
the firm marginally (Bonin, 2017). Considering the figure 3 it can be seen that AS curve will
shift from AS0 to AS1.

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Figure 3: Shift of the AD-AS curve due to policy change
Source: (Created by Author)
Considering there will be no change in the demand, new price will be P1 and the output
will be Y1. Thus, there will be change in real GDP by Y0Y1 amount and the price change will
be P0P1 amount.
d:
With fall in the oil, there will be rise in output by the firm because the firms can buy
more amount of fuel at same cost.

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Figure 4: Shift of the AD-AS curve due to policy change
Source: (Created by Author)
Rise in fuel purchasing capability will increase the supply from AS0 to As1. Under this
scenario, if there is no rise in the demand, then price change will be P0P1 and the real GDP rise
will be Y0Y1.
e:
With rise in the immigration intake, production capability of the economy will rise
because they can employ more amount of worker at lower cost (Blau & Kahn, 2015).

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Figure 5: Shift of the AD-AS curve due to policy change
Source: (Created by Author)
Considering this, it can be entailed as per the figure 5 that supply curve will shift from
AS0 to AS1 and this will cause rise in the output by Y0Y1 amount, whereas, the price will fall
by P0P1 amount.

7ECONOMICS ASSIGNMENT
Reference:
Blau, F. D., & Kahn, L. M. (2015). Immigration and the Distribution of Incomes. In Handbook
of the economics of international migration (Vol. 1, pp. 793-843). North-Holland.
Bonin, H. (2017). Economics of education.
Friedman, M. (2017). Price theory. Routledge.
Gilboy, E. W. (2017). Demand as a Factor in the Industrial Revolution. In The causes of the
industrial revolution in England (pp. 121-138). Routledge.
Kilian, L., & Murphy, D. P. (2014). The role of inventories and speculative trading in the global
market for crude oil. Journal of Applied Econometrics, 29(3), 454-478.