1. In the Fischer model, we change the aggregate supply and demand curves to Y = P, - E-Pt + u; Y, = M – Pt That is, there is no demand shock but there is a supply shock u.. The shock is an AR(1) process u, = pu,-1+ ee, where e, is a zero-mean white noise. Everything else of the model is the same as the one discussed in class. a) For the case of a one-period contract, show that money has no effect on output. b) For the case of a two-period contract, show that money can make output less volatile. c) How does your answer change if the supply shock is white noise instead of an AR(1) process?

1. In the Fischer model, we change the aggregate supply and demand curves to Y = P, - E-Pt + u; Y, = M – Pt That is, there is no demand shock but there is a supply shock u.. The shock is an AR(1) process u, = pu,-1+ ee, where e, is a zero-mean white noise. Everything else of the model is the same as the one discussed in class. a) For the case of a one-period contract, show that money has no effect on output. b) For the case of a two-period contract, show that money can make output less volatile. c) How does your answer change if the supply shock is white noise instead of an AR(1) process?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q: Let's consider a long term model with sudden demand shock. The demand function is:(M/P)D=a,+aY-a,(r+re). a, refers to the shock. (a)For example, one day the exchange cost between bond and physical money suddenly becomes zero. Suppose people's expenditure is constant, how will the demand for money change? (hint: the demand for cash) (b)The conditions are the same as (a). In the long run, how will the price level P change?
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
The Covid-19 crisis and lockdown has been a supply-side shock to the South African economy. In response, the government offered a R500bn stimulus package to help cushion the blow. Use the AD-AS model, in conjunction with the IS-LM-BP, to explain the supply and demand dynamics of the shock and policy response. Where will equilibrium income and prices settle? Draw the graphs and explain the complete chain reaction, VuwaniAfrica @matenzhes Apr 22, 2020 ... Summary of RS00bn South Africa stimulus package: R200bn: Loan guarantee scheme R100bn: Jobs protection/creation R70bn: Tax relief R20bn: PPE R20bn: Municipalities RS0bn: Social grants R40bn: UIF (payment for layoffs) Ria livhuwa @CyrilRamaphosa,
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