Now, let’s apply your knowledge of the ad/as model to predict the effect on economic variables (i. e., p, rgdp, interest rates, wages, savings and spending) of some events on the u. s. economy. diagram the effect of the following events. be sure to explain the effects in the short run and effects in the long run for each question, in words. to keep things clear, assume that in each case the economy starts out at long-run equilibrium.

a. labor unions become better organized, and this allows them to drive up wages in the short run in the u. s. (3 points)
b. tensions in south america dramatically increase the price of coffee. for the sake of argument, suppose coffee is an important input in many industries, including computer programming, transportation, and financial services. (3 points)
c. the government increases both taxes and spending by $500 billion. the money is spent domestically. hint: be sure to provide a strict interpretation of the ad/as model as part of your answer. (3 points)
d. suddenly, foreign countries sell great quantities of important inputs such as steel and computer chips at very low prices in this country. hint: the long-run effect will depend on whether the price decrease is permanent or not. (3 points)

Exercise 18-15 sheffield appliance center is an experienced home appliance dealer. sheffield appliance center also offers a number of services for the home appliances that it sells. assume that sheffield appliance center sells ovens on a standalone basis. sheffield appliance center also sells installation services and maintenance services for ovens. however, sheffield appliance center does not offer installation or maintenance services to customers who buy ovens from other vendors. pricing for ovens is as follows. oven only $790 oven with installation service 850 oven with maintenance services 970 oven with installation and maintenance services 990 in each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $180. additionally, the incremental amount charged by sheffield appliance center for installation approximates the amount charged by independent third parties. ovens are sold subject to a general right of return. if a customer purchases an oven with installation and/or maintenance services, in the event sheffield appliance center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $790. assume that a customer purchases an oven with both installation and maintenance services for $990. (b) indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract.