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Assume an economy that starts with Y = Yn. Illustrate graphically and explain the impact of a contractionary monetary policy shock (e.g. a fall in the money supply or a rise in the interest rate) on output, inflation, and the distribution between profits and real wages in each of the following three models: Blanchard IS-LM-PC model with exogenous money; the Blanchard IS-LM-PC model with endogenous money; and the Anti-Blanchard IS-LM-PC model with endogenous money where firms have the power to adjust the economy after a shock. In all cases assume inflation expectations are anchored, include a graph of inflation over time, and assume no deflationary spiral is created by the monetary policy shock. Briefly explain why it is difficult to empirically estimate the impact of monetary policy on output due to the problem of endogeneity caused by simultaneity. Discuss the extent to which there is empirical evidence to support any of the models' predictions regarding the impact of monetary policy changes. Which evidence is most important for policymakers in the UK today?

Assume an economy that starts with Y = Yn. Illustrate graphically and explain the impact of a contractionary monetary policy shock (e.g. a fall in the money supply or a rise in the interest rate) on output, inflation, and the distribution between profits and real wages in each of the following three models: Blanchard IS-LM-PC model with exogenous money; the Blanchard IS-LM-PC model with endogenous money; and the Anti-Blanchard IS-LM-PC model with endogenous money where firms have the power to adjust the economy after a shock. In all cases assume inflation expectations are anchored, include a graph of inflation over time, and assume no deflationary spiral is created by the monetary policy shock. Briefly explain why it is difficult to empirically estimate the impact of monetary policy on output due to the problem of endogeneity caused by simultaneity. Discuss the extent to which there is empirical evidence to support any of the models' predictions regarding the impact of monetary policy changes. Which evidence is most important for policymakers in the UK today?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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can you please show clear drawings of all the diagrams and label them accordingly for every single situation 

Assume an economy that starts with Y = Yn. Illustrate graphically and explain the impact of a contractionary monetary policy shock (e.g. a fall in the money supply or a rise in the interest rate) on output, inflation, and the distribution between profits and real wages in each of the following three models: Blanchard IS-LM-PC model with exogenous money; the Blanchard IS-LM-PC model with endogenous money; and the Anti-Blanchard IS-LM-PC model with endogenous money where firms have the power to adjust the economy after a shock. In all cases assume inflation expectations are anchored, include a graph of inflation over time, and assume no deflationary spiral is created by the monetary policy shock. Briefly explain why it is difficult to empirically estimate the impact of monetary policy on output due to the problem of endogeneity caused by simultaneity. Discuss the extent to which there is empirical evidence to support any of the models' predictions regarding the impact of monetary policy changes. Which evidence is most important for policymakers in the UK today?
Transcribed Image Text:Assume an economy that starts with Y = Yn. Illustrate graphically and explain the impact of a contractionary monetary policy shock (e.g. a fall in the money supply or a rise in the interest rate) on output, inflation, and the distribution between profits and real wages in each of the following three models: Blanchard IS-LM-PC model with exogenous money; the Blanchard IS-LM-PC model with endogenous money; and the Anti-Blanchard IS-LM-PC model with endogenous money where firms have the power to adjust the economy after a shock. In all cases assume inflation expectations are anchored, include a graph of inflation over time, and assume no deflationary spiral is created by the monetary policy shock. Briefly explain why it is difficult to empirically estimate the impact of monetary policy on output due to the problem of endogeneity caused by simultaneity. Discuss the extent to which there is empirical evidence to support any of the models' predictions regarding the impact of monetary policy changes. Which evidence is most important for policymakers in the UK today?
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