Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 13

(a) Housing prices rose sharply between 2002 and midyear 2006. Use the AD-AS model to illustrate the impact of the housing price increases on output and employment. (b) During 2007 and 2008, housing prices fell sharply. Use the AD-AS model to illustrate the impact of these price declines on output and employment.