Adjust the graph to show the short-run effect of the contractionary monetary policy. PRICE LEVEL 210 175 140 105 70 35 0 0 SRAS 2 3 REAL GDP (Trillions of dollars) AD 5 6 þ AD SRAS ? Compare monetarist and Keynesian views regarding the monetary policy transmission mechanism, and select the multiple-choice option that best describes the following statement. "The effectiveness of monetary policy depends primarily on how monetary policy influences interest rates." O Monetarists agree with this statement, but Keynesians do not. O Monetarists and Keynesians agree with this statement. O Keynesians agree with this statement, but monetarists do not. O Neither monetarists nor Keynesians agree with this statement.

Adjust the graph to show the short-run effect of the contractionary monetary policy. PRICE LEVEL 210 175 140 105 70 35 0 0 SRAS 2 3 REAL GDP (Trillions of dollars) AD 5 6 þ AD SRAS ? Compare monetarist and Keynesian views regarding the monetary policy transmission mechanism, and select the multiple-choice option that best describes the following statement. "The effectiveness of monetary policy depends primarily on how monetary policy influences interest rates." O Monetarists agree with this statement, but Keynesians do not. O Monetarists and Keynesians agree with this statement. O Keynesians agree with this statement, but monetarists do not. O Neither monetarists nor Keynesians agree with this statement.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Start with a brief introduction that explains use of Government policy to control the economy. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy? Look at both. What specific fiscal policy tools would you use to stimulate aggregate demand and how? What specific monetary policy tools would you use to stimulate aggregate demand and how? What is your conclusion, should policymakers use the monetary and or fiscal policy, or a combination of both, to stimulate aggregate demand? Explain your reasoning.
How does the federal government reduce interest rate? What happens to interest rate and quantity of money as a result of expansionary monetary policy? Please explain using a diagram of interest rates vs quantity of money. showing the relevant shifts in the supply and demand curve.
3. If the FED can only directly control nominal interest rates, how does the FED influence real interest rates that determine the actual stance of monetary policy?
What are the two goals of monetary policy? Oa. Maximum employment and low and stable inflation Ob. Maximum employment and high and stable inflation Oc. Minimum employment and stable inflation Od. Controlled government spending and low taxes
4.This is a two-part assignment using the links below plus additional resources. Using the below links interpret the monetary and fiscal policies as either expansionary or contractionary. Define which school of thought supports each of the polices. Make sure to cite at least three sources either in MLA or APA style and have a minimum of 250 words. Here are some sources to get started https://www.whitehouse.gov/issues/budget-spending/ (Links to an external site.) https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
The following graph illustrates a shift of the aggregate demand curve to the right. It can be caused by: (Select at least 2 of the following that apply.) Select all that apply: contractionary monetary policy Price Level (base year = 100) 120 110 100 90 80 400 E₂ LRAS SRAS E₁ AD₁ ADⓇ 500 600 Real Output (constant dollars) 700 800
. How does monetary policy affect aggregate demand? a) By influencing consumer spending only b) By influencing investment spending only c) By influencing both consumer and investment spending d) By influencing government spending only -. A central bank uses contractionary monetary policy to: a) Combat deflation
16. Keynes (1936) argued that, from a policy perspective, everything that can be achieved by a nominal wage cut can be more effectively achieved through an appropriate monetary policy. (a) Does this statement hold in the deﬁcient-demand Keynesian model for a negative shock to (i) aggregate demand and (ii) aggregate labor productivity? (b) Does this statement hold in the new Keynesian model for a negative shock to (i) aggregate demand and (ii) aggregate labor productivity?
A country's central bank is engaging in monetary contraction, with M going from M0=40 to M1=20. Its economy is as follows. Goods: slc = 3 MPC = 0.7 G = 10 T = 9 Before the policy, the goods market equilibrium is at Y0 = 54. Financial: I = 18-200r Before the policy, the loans market equilibrium is at r = 4.25% and I = 9.5 Money: M0 = 40 P0 = 2 M/P = 0.02 / (r - Y/5000)^2 and finally, Labor: w = MPL = 0.5 * 4.5 * 16^0.6 / L^0.5 w = EP / P0 * L^0.5 Where workers currently expect the price level of EP=2. - There are four endogenous variables that adjust in response to shock/policy: Y, I, r, P. The policy variable of interest is M. Therefore, let's approach our solution by first recognizing that all other letters are just constants and plug them in. For example: Y = 2 + 0.5(Y-6)+7+I becomes Y = 12 + 2*I First, express the goods market as expenditure being a linear function of investment I of the form: Y = a + b*I 1. How does the monetary contraction directly and immediately affect the…
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
3 E 1.7 The hypothetical information in the table below shows what the values for real GDP and the price level would have been in 2019 if the Federal Reserve did not use monetary policy: Real GDP F3 Year 2018 2019 Cxpansionary Di bills or sold them? $ d wanted to keep real GDP at it R a. Real GDP b. Full-employment real GDP c. The inflation rate d. The unemployment rate F4 b) Suppose the Fed's policy was successful in keeping real GDP at its potential level in 2019. State whether each of the following would be higher or lower than if the Fed had taken no action: Potential Real GDP $18.5 trillion 19.0 trillion I c) Draw an aggregate demand and aggregate supply graph to illustrate your answer. Be sure that your graph contains LRAS curves for 2018 and 2019; SRAS curves 2018 and 2019; AD curve for 2018 and 2019, with and without monetary policy actions; and equilibrium real GDP and the price level in 2019 with and without policy. % 5 T F5 O Search A 6 $18.5 trillion 19.4 trillion F6 Y F7 &…
• Given following information: Y = 4000 - 200i The IS equation Ms/P = 2000 Vertical LM • Calculate equilibrium interest rate and GDP? Suppose Fed uses easy monetary policy and increase the money supply to $3000. Calculate new equilibrium interest rate and GDP? Is this policy effective? 2- Suppose following information: Y = 2000 Vertical IS Y = 1000 + 100i The LM equation !! Calculate equilibrium interest rate and GDP? Suppose Fed uses easy monetary policy and increase the money supply to Y = 1500 +100i. Calculate new equilibrium interest rate and GDP? Is this policy effective? !!