(GDP deflator,2000 = 100)LRASSRAS,SRAS,ADY,Real GDP(trillions of 2000 dollars)Refer to Figure 12-1. Suppose the economy is at point D. If the Fed engages in appropriate open marketpricesand unemploymentoperations, we should expect to see outputO not change ; increase ; not changeO increase ; decrease; increaseO increase ; increase ; decreaseO decrease ; decrease; increaseO decrease ; not change ; not change

At point D, SRAS2 and AD1 intersects each other. The output level corresponding to point D is…

Answered: 2000 = 100) SRAS, SRAS, AD AD2 Real GDP…

2000 = 100) SRAS, SRAS, AD AD2 Real GDP (trillions of 2000 dollars) Y, Refer to Figure 12-1. Suppose the economy is at point D. If the Fed engages in appropriate open market rices and unemployment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 12 1 pts Other things equal, an increase in the money supply will: shift the AS curve to the right. cause a movement along a given AD curve. shift the AD curve to the left. shift the AD curve to the right.
The figure to the right shows an economy in an initial long-run equilibrium at point A. a. Using the line drawing tool, show how, if at all, the equilibrium real GDP and the long-run equilibrium price level are affected by a reduction in the quantity of money in circulation. Properly label this line. Carefully follow the instructions above, and only draw the required objects. b. According to your graph, the equilibrium price level while the equilibrium real GDP Price Level LRAS₁ A RGDP1 Real GDP ($ trillions per year) AD₁
Supposed the economy is faced with persistently rising prices and there is a real threat of a worsening inflation. What specific actions/policy can the Central Bank implement to curb this threat and why? Based on the IS-LM model, if the Central Bank does this, which curve will shift and in what direction? Predict the effects of the Central Bank action on the following: Income: ________________ Interest Rate: ____________ Consumption: ___________ Investment: ______________
Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on output and the price level in the short run. Price Level K Aggregate Demand Quantity of Output The price level will fall. LRAS The demand for money will fall. Aggregate Supply The equilibrium interest rate will rise. Yes Which of the following will happen when the economy makes the transition from its short-run equilibrium to its long-run equilibrium? (Note: Do not adjust the graphs to reflect the transition to the long run.) Check all that apply. No Aggregate Demand Aggregate Supply LRAS (?) Is this analysis consistent with the proposition that the money supply has real effects in the short run but is neutral in the long run?
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.
Suppose the Fed wants to set the real interest rate 1 percentage point lower than the inflation rate. Nominal interest rates cannot fall below zero. a. Graph the MP curve for inflation values between -2% and 2%. b. Graph the AD curve. Label the inflation rate at which it kinks.
Explain it using the graph
explain how a sudden decrease in Aggregate Demand and a drop in expected inflation affect inflation, interest rates, FX rate if capital is very mobile (no need to show BP curve if you understand the intuition), GDP gap and the unemployment rate.
All of the following statements are true EXCEPT: Graph A Price Level LRAS SRAS Price Level (P) (P) SRAS Pe PE AD AD QE QN Real GDP (Q) Qv Qr Real GDP (Q) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a The economy depicted in Graph A is experiencing a recessionary gap. In response to the situation, the Fed is likely to buy bonds and announce a lower federal funds rate target. b The economy depicted in Graph B is experiencing an inflationary gap. In response to the situation, the Fed is likely to sell bonds and announce a higher federal funds rate target. с The Federal Reserve is likely to conduct contractionary monetary policy in response to the situation depicted in Graph A. The Federal Reserve is likely to conduct contractionary monetary policy in response to the situation depicted in Graph B. Graph B LRAS
Pick 1 answer. Q3. When the economy is at full capacity: A. The economy is at less than full potential employment, and inflation may rise B. The economy is at full potential GDP, and inflation may fall C. The economy is at less than full potential employment, and inflation could rise or fall. D. The economy is at full potential GDP, and infiation may rise 9. If output is greater that full potential (full employment) output: A) A recessionary gap may result B) An unemployment gap will result C) A deflationary gap may result D) An inflationary gap may result
Please explain whole parts on paper please!!
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force O The level of technological knowledge The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL