Question

For each of the following events, explain the short-run and long-run effects on output and the price level, assuming open economy and that policymakers take no action.

a. The stock market declines sharply, reducing consumers’ wealth.
b. The federal government increases spending on national defense.
c. A technological improvement raises productivity.
d. A recession overseas causes foreigners to buy fewer U.S. goods.

Answer 1

b. The federal government increases spending on national defense.

Step-by-step explanation:

Hope this helps

Answer 2

High prices of products as well as increases poverty.

Step-by-step explanation:

The stock market declines sharply, reducing consumers’ wealth that leads to high prices of products as well as increases poverty. The federal government increases spending on national defense that decreases the foreign reserves and money for other fields of the country. A technological improvement raises productivity which increases the economy of the country as well as standard of living. A recession overseas causes foreigners to buy fewer U.S. goods that leads to lower income of the country and purchasing power of the country. Due to this, there is less money for other fields and institutions.