3. The long-run effects of monetary policyThe following graphs plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregatesupply (LRAS) curves. The second graph plots the long-run and short-run Phillips curves (LAPC and SRPC, respectively).PRICE LEVEL1LRAS3OUTPUT (Trillions of dollars)ADAD10LRAS(?) THANINFLATION RATED003LRPCO12UNEMPLOYMENT RATE (Percent)$SRPC15:SRPC101LRPCWhich of the following statements are true based on these graphs? Check all that apply.The natural level of output is $3 trillion.The unemployment rate is currently 9% higher than the natural rate of unemployment.The current quantity of output is greater than potential output.

The amount of commodities that are readily available while all inputs are uncertain is known as the…

3. The long-run effects of monetary policy The following graphe plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second graph plots the long-run and short-run Phillips curves (LAPC and SRPC, respectively) PRICE LEVEL 1 डै 3 OUTPUT (Trillions of dollars) AD AD 16 LRAS

3. The long-run effects of monetary policy The following graphe plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second graph plots the long-run and short-run Phillips curves (LAPC and SRPC, respectively) PRICE LEVEL 1 डै 3 OUTPUT (Trillions of dollars) AD AD 16 LRAS

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Based on the most recent announcement made by the RBA Governor (see the RBA Statement on the Monetary Policy Decision for May 2023 below), identify what type of monetary policy did the RBA implement in this announcement? Which part of the AD-AS model is this policy aiming to shift and in what direction? What does the RBA’s monetary policy decision tell us about which phase of the business cycle we are currently in, and which economic indicator the RBA is most concerned about? (3-4 sentences) 2. In its announcement, the RBA Governor refers to “the importance of returning inflation to target.” As part of your Policy Brief, explain what is meant by the inflation target and how does an inflation target contribute to good economic management? Based on the news updates that we discussed in our lectures and tutorials throughout this course, what are some factors that are currently contributing to inflationary pressures in Australia and globally, and which part of the AD-AS model are…
The Fed is fighting recession and it happens to overstimulate the economy. If the expected inflation rate rises above the 2 percent goal, what is the cost of returning the inflation rate back to its goal? The cost of returning the inflation rate back to its goal is _______. A. an inflationary gap and an even higher inflation rate than initially B. unemployment below the natural unemployment rate C. a decrease in potential GDP and aggregate supply D. a recessionary gap and a higher unemployment rate
Question 23 The Fed's Policies under Volcker In the years 1979 to 1982, under the leadership of Paul Volcker, the Fed adopted a tight money policy to reduce the nation's inflation rate. Based on the aggregate supply - aggregate demand model, what would happen to the price level in the long run as a result of the Fed's tight money policy under Volcker's leadership? Choose one answer below: O The price level would end up higher in the long run. The price level would end up lower in the long run. O The price level would end up at its initial level in the long run.
If the velocity of money is assumed to be constant in the short run, the quantity theory of money contends that a decrease in the money supply will lead to a proportional ____ a. Increase in unemployment rate b. Increase in nominal interest rate c. Increase in price level d. Decrease in nominal output
Exhibit: Monetary Policy and Rational Expectations Price level Pa Pb Pe Pa LRAS 70 AQUDUN CEEKER VANDIERA C a AS b AD₁ YcY₁ Yb ASI AD2 Real GDP per year ม (Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a. Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at: a. b. They rationally adjust their behavior and the aggregate demand curve shifts to the left and b becomes the new equilibrium point. O b. c. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point. O c.d. They rationally adjust their behavior and the aggregate demand curve shifts to the left and d becomes the new equilibrium point. O d.d. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point. Save Answer
4. Monetary policy and the Phillips curve The following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rate and inflation rate. Assume that the economy is currently in long-run equilibrium. Suppose the central bank of the hypothetical economy decides to increase the money supply. On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy. Hint: You may assume that the central bank's move was unanticipated. INFLATION RATE (Percent) 6 5 N 1 0 0 SR Phillips Curve + 4 2 3 UNEMPLOYMENT RATE (Percent) 1 5 SR Phillips Curve In the short run, an unexpected increase in the money supply results in the unemployment rate. (?) in the inflation rate and in
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