3. The long-run effects of monetary policyThe following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) andlong-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC).PRICE LEVEL02LRAS468OUTPUT (Trillions of dollars)10AD12ADLRAS LRPC+SRPC36912UNEMPLOYMENT RATE (Percent)INFLATION RATE01518The natural level of output is $6 trillion.Which of the following statements are true based on these graphs? Check all that apply.The current quantity of output is greater than potential output.The unemployment rate is currently 9% higher than the natural rate of unemployment.SRPCSuppose the central bank of the economy decreases the money supply.The long-run effect of the central bank's policy isin real GDP.LRPCShow the long-run effects of this policy on both of the graphs by shifting the appropriate curves.in the inflation rate,in the unemployment rate, and

Inflation is the rate of rise in prices over a provided period of time. Inflation is typically a…

3. The long-run effects of monetary policy The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). LEVEL LRAS 6 6 AD LRAS

3. The long-run effects of monetary policy The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). LEVEL LRAS 6 6 AD LRAS

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter14: Money And The Economy

Section14.2: Monetarism

Problem 1ST

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How do you know if the Fed's actions achieve the goal of stable prices? The goal of stable prices is achieved when _______. A. the prices of food, clothing, and shelter are stable B. the PCEPI inflation rate excluding food and energy prices is 2 percent a year C. the general level of prices is changing, but we can accurately predict the rate of change D. the inflation rate is zero percent a year
How do you know if the Fed's actions achieve the goal of stable prices? The goal of stable prices is achieved when _______. A. the prices of food, clothing, and shelter are stable B. the PCEPI inflation rate excluding food and energy prices is 2 percent a year C. the general level of prices is changing, but we can accurately predict the rate of change D. the inflation rate is zero percent a year thanks s
3. The long-run effects of monetary policy The following graphs plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate supply (URAS) curves. The second graph plots the long-run and short-run Phillips curves (LRPC and SRPC, respectively). (?) PRICE LEVEL INFLATION RATE 0 2 3 4 OUTPUT (Trofdara) 9 UNEMPLOYMENT HATE (P) AD SHPC AD - The long-run effect of the central bank's policy is in real GDP LHAS SHPC LAPC (?) Which of the following statements are true based on these graphs? Check all that apply. The natural level of output is $6 trillion. The current quantity of output is greater than potential output. The unemployment rate is currently 9% higher than the natural rate of unemployment. Suppose the central bank of the economy pursues a policy that increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the inflation rate, in the unemployment…
Question 6 If the economy were represented by the following graph, what is the appropriate monetary policy? Price Level LRAS SRAS El P1 AD Real GDP Y1 Yp buy government bonds from commercial banks, thereby lowering interest rates and increasing aggregate demand. Ob sell government bonds to commercial banks, thereby lowering interest rates and increasing aggregate demand buy government bonds from commercial banks, thereby increasing interest rates and decreasing aggregate demand O d) sell government bonds to commerical banks, thereby increasing interest rates and decreasing aggregate demand.
Economics FRQ
10. What does the AD curve represent economically? A. It represents the difference between actual real GDP and nominal GDP B. It describes how the Fed chooses short-run output based on inflation C. It describes how the velocity of money can fluctuate in the short run D. All of the above
Would a monetary policy intended to bring about disinflation cause a greater increase in unemployment if workers and firms have adaptive expectations or if they have rational expectations. Briefly explain. 1. 2. Why is the credibility of the State Bank's policy announcements particularly important? 3. Why do workers, firms, banks and investors in financial markets care about the future rate of inflation? 4. Why do most economists agree that it is important to have a country's central bank to be independent of the country's central government? 5. How does an increase in interest rates affect aggregate demand? Briefly discuss how each component of aggregate demand is affected. If the State Bank believes the economy is about to fall into recession, what actions should it take? 6. 7. If the State Bank believes the inflation rate is about to increase, what actions should it take? 8. What is the main difference between M1 and M2 definitions of the money supply? 9. Explain the Consumption…
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
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 Thanks!
Let's assume that in our economy money supply is $15 billion, Velocity (V) is 5, and Output (Y) is $70 billlion in 2019. The base year is 2018. A. Calculate the price level (P) in this economy. B. What can you say about about inflation rate between 2018 and 2019. C. Calculate the money supply in this economy if we want inflation to be zero (0). D. If in 2021 this economy grows by 10% and money supply increases by 15%, what would be the inflation rate? Fo
Question 4Suppose a country’s inflation level is higher than desired, and unemployment levels arelower than expected – the central bank decides that the economy is ‘overheated’ andattempts to use the appropriate monetary policy to deal with the situation. Describe,with the help of the appropriate figure, how a central bank might go about implementingsuch monetary policy, the subsequent effects this has on interest rates, the quantity ofmoney in the market, and the process through which this affects the level of expenditurein the economy.