5. Problems and Applications Q5The following graph shows the long-run aggregate-supply curve (LRAS), the short-run aggregate-supply curve (AS), and the aggregate-demand curve for an economy.Price LevelThe economy is inLRASItaAggregate SupplyAggregate DemandQuantity of OutputMoneySupplywithTo return the economy to the natural rate of output, the Fed couldAggregate DemandMore DemandQuantity of MoneyAggregate Supplyunemployment andOn the following graph, illustrate the effect of the open market operation the Fed will need toperform to return the economy to its natural rate of output. Show the resulting change in theinterest rate.Money Demand10Money Supplyoutput.?government bonds.On the original graph, show the effect of the open market operation on output and the price level.

The aggregate demand curve shows the quantity of output that households, firms, the government, and…

5. Problems and Applications Q5 The following graph shows the long-run aggregate-supply curve (LRAS), the short-run aggregate- supply curve (AS), and the aggregate-demand curve for an economy. Price Level The economy is in LRAS Aggregate Supply Aggregate Demand Quantity of Output Voney Supply with Aggregate Demand Aggregate Supply unemployment and To return the economy to the natural rate of output, the Fed could On the following graph, illustrate the effect of the open market operation the Fed will need to perform to return the economy to its natural rate of output. Show the resulting change in the interest rate. Money Demand output. ? government bonds.

5. Problems and Applications Q5 The following graph shows the long-run aggregate-supply curve (LRAS), the short-run aggregate- supply curve (AS), and the aggregate-demand curve for an economy. Price Level The economy is in LRAS Aggregate Supply Aggregate Demand Quantity of Output Voney Supply with Aggregate Demand Aggregate Supply unemployment and To return the economy to the natural rate of output, the Fed could On the following graph, illustrate the effect of the open market operation the Fed will need to perform to return the economy to its natural rate of output. Show the resulting change in the interest rate. Money Demand output. ? government bonds.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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134.) Suppose the Federal Reserve increases the reserve requirement ratio for banks in the United States. We can say that Unemployment will increase in the short-run Input usage will increase in the short-run Price Level will increase in the short-run Only a & c are correct
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The U.S. economy is at full employment when the Fed increases the quantity of money, and all other things remain the same. Explain the effect of the Fed's action on aggregate demand in the short run. An increase in the quantity of money. A. increases aggregate demand B. decreases aggregate demand C. decreases the quantity of real GDP demanded but aggregate demand does not change D. increases the quantity of real GDP demanded but aggregate demand does not change
8. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the increase in government spending. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in government spending on infrastructure causes the price level to the price level people expected and the quantity of output to the natural level of output. The increase in government spending will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in…
2. Suppose the Fed reduces the money supply by20 percent.(Use AD/AS model with sticky prices) a. What happens to the aggregate demandcurve? b. What happens to the level of output and theprice level in the short run and in the longrun? c. According to Okun’s law, what happens tounemployment in the short run and in thelong run?
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
Q1. The following table shows the aggregate demand and short-run and long-run aggregate supply schedules for Japan. Price level 75 85 95 105 115 125 135 Real GDP demanded (trillions of 2005 yen) 600 550 500 450 400 350 300 Real GDP supplied in the short-run (trillions of 2005 yen) 400 450 500 550 600 650 700 Real GDP supplied in the long-run (trillions of 2005 yen) 1. What is the short-run equilibrium real GDP and price level? 2. What is the long-run equilibrium or real GDP and price level? 3. Does Japan have an inflationary gap or recessionary gap? How much? 4. Explain how the economy will adjust to restore the long-run equilibrium? 600 600 600 600 600 600 600
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