) Consumers use cash in transactions more frequently in response to an increase in identity theft. As a result of this shock, the IS [moves/doesn't move] and the LM [moves/doesn't move]. In the short run (i.e. when prices are sticky), Y [increases / decreases], r____[increases / decreases], C_--_[increases / decreases], planned investment -_[increases / decreases], the unemployment rate [increases / decreases]. If the central bank wanted to help the economy return to potential GDP, it could implement (expansionary / contractionary] monetary curve curve policy

) Consumers use cash in transactions more frequently in response to an increase in identity theft. As a result of this shock, the IS [moves/doesn't move] and the LM [moves/doesn't move]. In the short run (i.e. when prices are sticky), Y [increases / decreases], r____[increases / decreases], C_--_[increases / decreases], planned investment -_[increases / decreases], the unemployment rate [increases / decreases]. If the central bank wanted to help the economy return to potential GDP, it could implement (expansionary / contractionary] monetary curve curve policy

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that changes in bank regulations reduce the availability of credit cards so that people need to hold more cash. Show how this event affects the demand for money. Value of Money (1/P) Supply True Quantity of Money If the Fed does not respond to this event, the price level will False Demand Demand Supply True or False: If the Fed wants to keep the price level stable, it should reduce the money supply. (?)
See below. These are true or false questions. 1). In the long-run, aggregate supply is a horizontal line at the long-run price level people can afford. 2). One reason for why the aggregate demand curve slopes down is the wealth effect, which means that a higher price level leads to lower real wealth and, thereby, reduces the level of consumption.
1. Consider an economy in long-run equilibrium at P1,Y*. Demand for money decreases. What will be the new long-run equilibrium? Group of answer choices Price will be higher than P1 and output will be equal to the natural output. Price will be higher than P1 and output will be smaller than the natural output. 2.What should be the optimal policy response to a negative demand shock according to a neoclassical economist? Group of answer choices The government should lower the interest rate to shift the AD to the right The central bank should enact an expansionary monetary policy to move back the AD to the initial position The government should lower wages to accommodate the adjustment of the AS curve None. The economy will self adjust and there is no need of intervention. Price will be higher than P1 and output will be higher than the natural output. Price will be lower than P1 and output will be equal to the natural output.
Solve b, c and d
Without prices to coordinate supply to demand, technocrats and central planners must use statistics. What is one thing that prices capture that statistics cannot? Prices capture quantitative information O Prices capture macroeconomic fluctuations O Prices capture the historical movements of supply and demand Prices capture future expectations
10 Investment Demand AS AD, (I-40) AD, (I=30) AD, (1=20) $10 20 Investment ($) 30 40 50 Real GDP ($) Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3, labels indicate the levels of investment spending associated with each curve, respectively. All numbers are in billions of dollars. If the interest rate is 4 percent and the goal of the Fed is full-employment output of Q, it should O increase the interest rate from 4 percent to 6 percent. decrease the interest rate from 8 percent to 4 percent. O decrease the interest rate from 8 percent to 6 percent. maintain the interest rate at 4 percent. Interest Rate (%) Price Level
Traveler's checks are included in... M1 and M2 money supply neither M1 nor M2 money supply M1 money supply only M2 money supply only
Consider a different economy currently in recession. If the government wants to change its spending to cause a $10,000 increase in output Y and people in the economy spend 95 percent of each additional dollar they get, how much must G change? Carefully follow all numeric directions. Use a negative number (with negative sign) to depict an increase in G and a positive number (no sign) to depict a decrease.
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The aggreate demand curve will shift to the ..... if ..... (Chose one or more.) a. left / the money supply is reduced. b. right / there is unemployment. c. right / the money supply is reduced. d. right / there is a negative demand shock. e. left / there is a negative demand shock.