Consider the following table:Year20122013Potential GDP$14.9 trillion$15.3 trillionReal GDP$14.9 trillion$15.2 trillionPrice Level110112What can we expect from the Federal Reserve Bank if it seeks to move the economy in the direction of long-run macroeconomic equilibrium?OA. The Fed will pursue a contractionary monetary policy.B. The Fed will pursue a contractionary fiscal policy.c. The Fed will pursue an expansionary monetary policy.OD. The Fed will pursue an expansionary fiscal policy.If the Fed's policy is successful, what is the effect on the following indicators?Actual real GDP:Potential real GDP:Price level:Unemployment:

Step 1: Step 2: Step 3: Step 4:

Answered: Consider the following table: Year 2012…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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30______________________The Federal Reserve, the central bank of the United States, has been cutting the interest rate in order to stimulate the recessionary economy. Interest cuts by the Federal Reserve are supposed to: FILL IN THE BLANK A). increase investment spending and thus increase GDP via the multiplier. B.) increase cash holding by the general public thus lowering their dependence on credit. C). increase government spending on the economic infrastructure and thus increase GDP through the multiplier process. D). lower the savings rate in the economy and stop leakages. _ E) all of the above
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13. Suppose that two countries differ on in the size of their MPC, where the MPC is high in country A and low in country B. Draw IS/LM and AD/AS curves for each country. In which country will monetary policy be most effective at changing income? Fiscal policy?
Table 15-4 Year 2022 2023 Potential Real GDP $18.1 trillion 18.4 trillion Real GDP $18.1 trillion 18.3 trillion Price Level Use the editor to format your answer 150 153 Refer to Table 15-4. Suppose the following table illustrates the values of real and potential GDP and the price level if the Fed does not vote to change their current policy to be more contractionary or expansionary. If the Fed wants to keep real GDP at its potential level in 2023, should the Fed use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?
7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in April 2023. Suppose the government decides to intervene to bring the economy back to the natural level of output by using (FILL IN THE BLANK) policy. Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output.
? G The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports. Using the graph, 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. PRICE LEVEL 240 200 AS 160 120 80 40 0 0 200 400 600 AD 800 1000 1200 OUTPUT (Billions of dollars) ŏ AD 一 AS (?) In the short run, the increase in government spending on infrastructure causes the price level to the quantity of output to the price level people expected and 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 a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of…
Let’s study the crowding-out effect which is triggered by a discretionary fiscal policy. How does a temporary increase in government purchase affect the interest rate based on the money supply-demand model? Why? Suppose we are having stagflation because of a supply shock. Please show the temporary increase in government purchases can restore the long-run macroeconomic equilibrium using a graph. What is the meaning of the crowding-out effect? Please show the short-run crowding out effect using a graph.
Please answer everything in the photos including the graph.
Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on output and the price level in the short run. Price Level K Aggregate Demand Quantity of Output The price level will fall. LRAS The demand for money will fall. Aggregate Supply The equilibrium interest rate will rise. Yes Which of the following will happen when the economy makes the transition from its short-run equilibrium to its long-run equilibrium? (Note: Do not adjust the graphs to reflect the transition to the long run.) Check all that apply. No Aggregate Demand Aggregate Supply LRAS (?) Is this analysis consistent with the proposition that the money supply has real effects in the short run but is neutral in the long run?
7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, as well as the pros and cons of using these tools to combat economic fluctuations. The following graph plots hypothetical aggregate demand (AD), short-run aggregate supply (AS), and long-run aggregate supply (LRAS) curves for the U.S. economy in March 2026. Suppose the government chooses to intervene in order to return the economy to the natural level of output by using Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output. 150 130 110 PRICE LEVEL 8 70 M 20 23 LRAS 34 24 OUTPUT (Tons of dears) AS AD 26 AD policy. AS
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7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, as well as the pros and cons of using these tools to combat economic fluctuations. The following graph plots hypothetical aggregate demand (AD), short-run aggregate supply (AS), and long-run aggregate supply (LRAS) curves for the U.S. economy in January 2026. Suppose the government chooses to intervene in order to return the economy to the natural level of output by using Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output. PRICE LEVEL 150 130 110 90 AS AD D AS policy. ?

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