Complete the following table to compare the results of an unanticipated expansionary policy to those of an anticipated expansionary policy in the short run and long run. Determine whether, in the short run, the level of output increases, decreases, or remains unchanged relative to the potential output level when the expansionary policy is anticipated versus unanticipated. Additionally, determine whether, in the long run, the actual price level is above, below, or the same as initial expectations under both scenarios, and, again, determine whether the level of output increases, decreases, or remains unchanged.   Anticipated Expansionary Policy Unanticipated Expansionary Policy Short-Run Change in Output Decrease/Increase* Decrease/Increase/No Change* Long-Run Change in Price Level Same as Initial expectation/Higher then initial expectations/ lower then initial expectations* (same options as box on the left) ** Long-Run Change in Output       Decrease/Increase/No change*         Decrease/Increase/No change*

Q: Which of the following best describes the concept of 'rational expectations' in the context of…

A: We need to understand what 'rational expectations' means in macroeconomic theory. This concept…

Q: Assume that the central bank has an inflation target and it follows an interest rate rule. The…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Which of the following is a reason for the downward slope of the AD curve?     the wealth effect…

A: Aggregate demand shows a negative relationship between price level and real GDP.

Q: Within the Keynesian model with both a flexible price and flexible money wage, illustrate…

A: The Keynesian model primarily emphasizes the intervention of the state whenever needed in the hours…

Q: Show using a graph how the following shocks would affect equilibrium output. (Which parameters in…

A: Equilibrium occurs when aggregate demand and aggregate supply are equal. The aggregate demand shock…

Q: Consider the AD-AS model Y = Y* — ay(π − π*) + €D - π = π² + ß(Y - Y*) + €s Suppose the parameter…

A: We have the following information:

Q: Apparently, Keynes assumed stable prices regardless of the level of government money creation. Was…

A: When talking about Keynesian economics, it can be said that this theory is primarily applicable…

Q: In the AD/AS model, what happens if businesses expect higher future profits while inflationary…

A: The AD/AS (Aggregate Demand/ Aggregate Supply) model is a macroeconomic model. It explains how the…

Q: Based on research conducted by the Department of Economic Analysis, the government and policy…

A: Given,Note: All figures are in $ billion.

Q: How might the response of a central bank to an external inflation shock depend upon the way that the…

A: Inflation Shock:- An inflationary shock occurs if commodity prices rise unexpectedly (e.g., as a…

Q: 8. Economic fluctuations 1 The following graph shows the economy in long-run equilibrium at the…

A: Government expenditure is spent on public infrastructure such as health care, education, defense and…

Q: In the standard AS-AD framework, after a positive one-period inflation shock at time t (that is, ō,…

A: inflation is the pace of increase in costs throughout a given timeframe. inflation is commonly a…

Q: Please I need a short summary for this video:…

A: The question  asks to summarise the contents of the video which contains the mechanism involved in…

Q: In the IS-MP framework, starting from macroeconomic equilibrium at a 0% output gap: (a) a rise in…

A: In an economy, IS-MP mod provide information about the investor saving model and the monetary policy…

Q: Consider an AD-AS model with AD curve Y−Y* = −ay(n − π*) + ED and AS curve = + 8(Y-Y*) + es with…

A: The total demand associated with all the final goods and services manufactured in an economy is…

Q: Following the wage and price adjustments, the short run AS curve shifts rightward, moving the…

A: Aggregate Supply (AS) curve:It represents the total quantity of goods and services that producers in…

Q: The mainstream view of macroeconomic instability emphasizes sticky prices. To answer the following…

A: Macroeconomics: It refers to the policies of the government in which the economy as a whole is…

Q: According to the pure expectations theory, the short term rates will exceed long term rates whenever…

A: The pure expectations theory assumes that investors are indifferent between holding short-term or…

Q: According to rational expectations economists, as a result of an increase in aggregate demand due to…

A: Rational expectations theory suggests that individuals and businesses make decisions based on their…

Q: A Keynesian economy is described by the following equations. Consumption                       Cd =…

A: Keynesian economy states that AD(aggregate demand) has the potential to affect both output and…

Q: A policy-maker minimises a loss function of the form: V = [u (unk)]² + a(л-π)² subject to current…

A: In a frictionless economic model, the time consistent rate of inflation is zero. This is because,…

Q: Empirical studies that have examined the longer-term effects of increasing the minimum wage Find…

A: Least wages have been characterized as the base measure of wages that a business is expected to pay…

Q: Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks…

A: The demand curve is the downward-sloping curve. The supply curve is the upward-sloping curve. The…

Q: Within the aggregate demand-aggregate supply framework, a strict interpretation of rational…

A: According to the economic theory of rational expectations, people make decisions based on the best…

Q: Consider the AD-AS model below. The economy is in long-run equilibrium at point in period 1.…

A: In an economy, people make rational expectations using their past experience, past decisions and…