4. Suppose that the President and Congress get legislation passed that encourages investment in research and development of new technologies. Assuming this policy results in a positive and permanent technological change, what does aggregate demand and supply analysis predict in terms of inflation and output? Only consider the self- correcting mechanism of the economy.

4. Suppose that the President and Congress get legislation passed that encourages investment in research and development of new technologies. Assuming this policy results in a positive and permanent technological change, what does aggregate demand and supply analysis predict in terms of inflation and output? Only consider the self- correcting mechanism of the economy.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter25: The Keynesian Perspective

Section: Chapter Questions

Problem 2SCQ: In a Keynesian framework, using an AD/AS diagram, which of the following government policy choices...

See similar textbooks

Similar questions

5. , Assume, while an economy is in long-run equilibrium, an adverse supply shock occured, such as energy prices have incrased. The central bank decides to accommodate this shock and restores the equilibrium quickly. What would be the effect of this policy action on inflation? Explain and illustrate with the help of an AD-AS diagram. 1
5
1. Show that if the economy's aggregate supply curve is vertical, fluctuations in the growth of aggregate demand produce only fluctuations in inflation with no effect on output.
5
Refer to the table below. Real Output Demanded, Original, Billions Real Output Supplied, Price Level Billions $506 112 $513 508 106 512 510 100 510 512 94 507 514 88 502 Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? percent Will this inflation be demand-pull inflation, or will it be cost-push inflation? (Click to select) b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? 2$ billion c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it? (Click to select) ♥
Refer to the table below. Real Output Real Output Demanded, Original, Supplied, Billions Price Level Billions $504 108 $515 507 104 512 510 100 510 513 96 507 516 92 500 Suppose that aggregate demand increases such that the amount of real output demanded rises by $11 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? percent Will this inflation be demand-pull inflation, or will it be cost-push inflation? |(Click to select) b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? billion c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it? |(Click to select) ♥
3. Suppose that the economy is well described by the New-Keynesian with partial sticky prices. Assume that the ZLB on nominal interest rate is binding. In your answer below, keep in mind the consumers' and firms' optimal decisions that give rise to the model and explain how and why agents' decisions change. a) Bank runs generate a large increase in spreads ft in the economy. What are the effects on aggregate outcomes (Y, P, r)? How does it compare to the case where the ZLB is not binding? Use diagram to support your answer b) The Central bank, as lender of last resort, decides to inject large amounts of money into financial institutions. Analyse the transmission mechanism of this policy action as well as its effects on output and price level.
ces Refer to the table below. Real Output Demanded, Original, Billions $ 506 508 510 512 514 Price Level 110 105 100 95 90 Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? percent Demand-pull inflation $ Will this inflation be demand-pull inflation, or will it be cost-push inflation? Real Output Supplied, Billions $ 513 512 510 507 502 b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? Decrease billion c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?
1
Refer to the accompanying figure. LRAS Inflation a A 0, y' Output O O An economy is currently in long-run equilibrium at point B, at an inflation rate of m, which is too high to sustain economic growth. If an anti-inflationary policy is enacted, the economy will be in short-run equilibrium at point creating gap. O SRAS O SRAS AD' AD A; an expansionary A; a recessionary D; a recessionary D; an expansionary
D Question 7 Refer to the figure. In the figure, assume the initial real growth rate of the economy is 3 percent when a negative aggregate demand shock shifts the AD curve from AD, to AD3. As a result of the Fed's policy response, the AD curve shifts to AD, in the short run. Which of the following is TRUE about the Fed's policy response? Inflation rate, LRAS SRAS ADS AD4 ► AD; AD2 AD; 3% Real growth O The Fed provided just the right amount of response to the shock. The Fed responded too much to the shock. O The Fed was too fast in responding to the shock. O The Fed responded too little to the shock.
Please no written by hand solutions Which of the followingfollofollowingf