Consider the AS-AD and three-equations models of a closed economy. Analyse the effects of an oil supply shock that causes a temporary increase in inflation, using the three-equation model. Assume that the shock lasts for one-period and then assumes the value 2%. Describe the mechanisms that bring the economy back to long-run equilibrium. What happens to aggregate demand?

Consider the AD-AS model. Assume the aggregate demand curve is given by Y= 8-0.5n, that the long run aggregate supply curve is given by Yp = 7, that the short run aggregate supply curve is given by n =n_expect + 0.3(Y - Yp), and that the monetary rule is given by r= 1+0.3n A) What is the economic interpretation behind the aggregate demand curve? Why is it negatively sloped? If you consider point A=(n,Y}=(3, 6.5) and point B={n,Y)=(5, 5.5), is monetary policy more expansionary in point A, in point B, or neither? Are you referring to the exogenous or to the endogenous stance of monetary policy? B) Suppose the economy is in equilibrium at the potential level of output, with inflation expectations equal to actual inflation, which equals 2%. A financial crisis hits the economy. Use the model to interpret what happens in the short run and in the long run if the central bank does not intervene exogenously with an expansionary monetary policy. C) According to the AD-AS model, what is more…

How can policy makers accommodate the adverse shift in short-run aggregate supply? a) By decreasing the long-run aggregate supply b) By increasing the price level c) By maintaining the output level d) By increasing the aggregate demand

a) In the AS/AD macro model, starting at potential GDP explain what happens in the short run when there is an exogenous increase in government consumption spending.b) What happens in the long run?c) What would be different in the short run and the long run if the initial shock had been an exogenous increase in energy prices?d) How would the answer to a) and b) have been different if the economy had started with excess capacity (and a horizontal short-run aggregate supply curve)?e) What is meant by “the GDP gap”?

Coronavirus pandemic and resultant shutdown measures to contain it have plunged the economies around the world including Singapore into severe contraction. Assuming Singaporean economy was in long run equilibrium in the aggregate demand and supply (AD-AS) model before the pandemic (and consequent shutdown) started, answer the questions below: Assuming the contraction in the Singaporean economy is mainly driven by demand side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words

Which of the following would be positive aggregate demand shock? A) a slower money growth B) increased import growth C) faster growth of government spending D) decreased investment spending E) None of the above.

Which of the following are conditions for the Complex Aggregate Supply and Aggregate Demand Model? Choose all that apply. Group of answer choices The change in potential real GDP determines the change in the unemployment rate. All three curves must shift. Long run equilbrium determines the change in real GDP and inflation. The relative magnitudes of each of the shifts must be specified. The change in the (output) gap determines the change in the unemployment rate. At least one curve must shift Short-run equilbrium determines the change in real GDP and inflation.

Consider the effects of Corona virus pandemic on the macro economy in Kenya. Suppose we assume that the massive lockdown of the economy that followed the outbreak represents a large negative aggregate demand shock, use the aggregate demand-long-run aggregate supply-short-run aggregate supply (AD-LRAS-SRAS) model to show what happens to output, prices and unemployment.  Thank you

Draw the AS-AD model for the following scenario: The economy is hit by a negative AD shock. Assume there is no monetary or fiscal policy implemented, and the AD shock is permanent. Make sure to include the initial equilibrium, the short-run equilibrium, and the new long-run equilibrium. Label the axes and the curves.

Which of the following is true in the dynamic AS-AD model? Group of answer choices The dynamic aggregate demand curve is downward sloping because the central bank follows the Taylor principle. An increase in the natural level of output increases the long-run inflation rate. To control inflation, the central bank should increase the nominal interest rate by less than one for one in response to an increase in the inflation rate. The monetary policy rule determines the slope of the dynamic aggregate supply curve.