1. Imagine an economy, where the SRAS in terms of inflation is given by II=5+Y, where Yis output. Imagine that the long run AS curve is given by Y=2. (25 marks)a) Give the equation of the AD curve (you can take liberties), if we assume thatinitially, the economy is at its long-run equilibrium. Justify.b) Imagine that your chosen AD curve's intercept goes up by one unit due to anexpansionary monetary policy. What will be the new final equilibrium after thischange? Justify.c) What will be the equilibrium after two periods of adjustment? Justify.d) Assume that before all the changes in the economy, in the initial, long-runequilibrium, the interest rate was 4 percent. Give an IS and an LM curve that arecompatible with this initial equilibrium. Justify.e) What are the IS and LM curves going to be at the very end of the adjustmentprocess, i.e., in the new long run equilibrium? Justify.

The objective of the question is to understand the dynamics of an economy in terms of aggregate…

Answered: 1. Imagine an economy, where the SRAS…

ENGR.ECONOMIC ANALYSIS

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1. Imagine an economy, where the SRAS in terms of inflation is given by II=5+Y, where Y is output. Imagine that the long run AS curve is given by Y=2. (25 marks) a) Give the equation of the AD curve (you can take liberties), if we assume that initially, the economy is at its long-run equilibrium. Justify. b) Imagine that your chosen AD curve's intercept goes up by one unit due to an expansionary monetary policy. What will be the new final equilibrium after this change? Justify. c) What will be the equilibrium after two periods of adjustment? Justify. d) Assume that before all the changes in the economy, in the initial, long-run equilibrium, the interest rate was 4 percent. Give an IS and an LM curve that are compatible with this initial equilibrium. Justify. e) What are the IS and LM curves going to be at the very end of the adjustment process, i.e., in the new long run equilibrium? Justify.
Price level in January 2051 is 98.1
I need help with this macroeconomic assignment. Thanks :)
Consider the Keynesian sticky wage model. Assume that the economy is operating close to, but not at, its zero lower bound (ZLB). Discuss the following: 1. Could a negative shock to the IS curve make the ZLB bind? Explain and illustrate graph- ically. 2. Could a shock to current productivity z make the ZLB bind? What would need to be the sign of this shock to make the ZLB bind? 3. In the data, in most episodes where the ZLB binds (the US in the wake of the Great Recession, Japan during the 1990s, and the US during the Great Depression), output is low. Given this, would a supply shock as the reason for a binding ZLB make empirical sense? 4. Intuitively, explain why changes in government spending have a bigger effect on output at the ZLB than away from it.
can you tell me if these answers are correct? they are true or false. 1)The output axis of the AD/AS curve is an approximation for the unemployment/employment level in the economy. -true 4) an increase in AD, given an upward sloping AS curve, will be inflationary, even beyond full employment output. -true 5) an increase in structural unemployment would be reflected as a shift of the vertical portion of the AS curve to the left- true
Please explain whole parts on paper please!!
question 2: In Figure 2, what are the factors that may cause the aggregate demand to shift from AD to AD1? What is the difference between demand pull inflation, cost push inflation, and recession?
=0. An economy is described by the following equations: AD: SRAS: Okun's law: Y = 4000 + 2(M/P) Y = ybar + 100(P-P) (Y-ybar)/ybar =-2(u-ubar). Assume ybar 6000 and ubar=0.05. = A) Suppose that the nominal money supply has long been at M = 4000 and is expected by the public to remain constant forever. The equilibrium value of P is The equilibrium value of P is, The equilibrium value of Y is, The equilibrium value of u is The equilibrium value of x is, (2 points each) B) A totally unexpected increase in in the money supply occurs, raising it from 4000 to 5250. [Part B is for extra credit] The short run equilibrium value of P is The short run equilibrium value of Pe is_ The short run equilibrium value of Y is The short run equilibrium value of u is. The value of unanticipated inflation, which is defined as (P-P)/P, is, The value of the slope of the short-run Phillips curve is (2 points each)
Consider the figure to the right. If this country's government decides to increase its short-term spending, what happens to the short-run equilibrium price level, and why? Is this an example of demand-pull or cost-push inflation? Explain. 1.) Using the line drawing tool, draw either a new aggregate demand (AD) curve or a new short-run aggregate supply (AS) curve that shows the effects of temporary government spending increases. Properly label your line. 2.) Using the point drawing tool, indicate the economy's new short-run equilibrium price and level of real GDP. Label this point 'E₂.' Carefully follow the instructions above, and only draw the required objects. Price Level LRAS₁ Real GDP per Year (S trillions) AS₁ AD₁
Price Level LRAS I о, он ог Real GDP SRAS, SRAS SRAS₂ ON=Natural Real GDP AD Refer to Figure 9-3. If the economy is in short-run equilibrium at point C, the (actual) unemployment rate is less than the natural unemployment rate. the (actual) unemployment rate is equal to the natural unemployment rate. the (actual) unemployment rate is greater than the natural unemployment rate. the relationship between the (actual) unemployment rate and the natural unemployment rate cannot be determined from the available information.
Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?

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