Suppose that the economy enters into a major recession brought on by a financial crisis that stems from a real estate bubble bursting and the ensuing fall in real estate (asset)
prices. Using graphical analysis, explain how the Classical view of the return to long run
potential output can be complicated by feedback effects in the AS/AD model.

Biochemical corp. requires $600,000 in financing over the next three years. the firm can borrow the funds for three years at 10.80 percent interest per year. the ceo decides to do a forecast and predicts that if she utilizes short-term financing instead, she will pay 7.50 percent interest in the first year, 12.15 percent interest in the second year, and 8.25 percent interest in the third year. assume interest is paid in full at the end of each year. a)determine the total interest cost under each plan. a) long term fixed rate: b) short term fixed rate: b) which plan is less costly? a) long term fixed rate plan b) short term variable rate plan