15. Demand shocks are unexpected changes in the demand for goods and services. Examples are:A sudden increase in average incomes will generate an overall (increase, decline) in theconsumption of goods and services in an economy, creating an unexpected (positive, negative) effect.An unexpected appreciation of the dollar will (increase, decrease ) the amount of exports and(expand, reduce ) the amount of imports in the United States. This will create an overall unexpected .positive , negative ) effect in the demand of the goods and services produced in the U.S.

A sudden increase in average income will generate an overall increase in the consumption of goods…

Answered: Demand shocks are unexpected changes in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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effect of fiscal and monetary policy on consumer spending in Zimbabwe
Which of the following is likely to occur for the United States, if the U.S. dollar appreciates relative to the Japanese yen, Answers: A. Aggregate demand will increase (shift right). B. SRAS will decrease (shift left). C. Aggregate demand will decrease (shift left). D. LRAS will increase (shift right).
Consider a world with two countries, the US and Japan. Assuming the standard Keynesian assumptions, please answer the following questions: a) Assuming flexible exchange rates, suppose the US experiences a positive shock to their consumption function so that the entire consumption function for the US shifts upward. Give and explain two reasons why the consumption function would react in this way. b) Draw three diagrams (all pertaining to the US): on the top left, draw the Keynesian cross diagram, on the bottom left, draw an IS - LM diagram, and on bottom right, draw the FX market. Locate the initial point as point A and then show how each diagram is affected by the shock and label as point B, again, assuming flexible exchange rates. Now assume that the US and Japan are in a fixed exchange rate regime. Show how things change and label the new equilibrium, assuming fixed exchange rates as point C (Note: use the same diagrams - i.e., each diagram should have points A, B, and C). c) Explain…
As the domestic price level falls domestic citizens will import less and direct spending to relatively cheaper domestic goods. Foreigners may also purchase more exports. Overall this will improve the trade balance and increasing aggregate demand. This phenomenon is known as the wealth effect the exchange rate effect the interest rate effect the liquidity effect
A new foreign government is elected and announces that once it is inaugurated, it will expand government purchases permanently. What is the domestic economy's response to this announcement? Use the AA-DD framework to answer your question.
To prevent an appreciation of the British pound, the U.S. Federal Reserve has to: Sell U.S. currency Buy British currency Sell British currency Devalue the U.S. dollar
Will decoupling from china will lead to actual inflation that the western Central banks wanted? Explain your answer
If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US interest rates next year, what is the likely impact on the value of the dollar?
The US economy slowed down sharply in the latter half of 2000, and the actual recession started early in 2001. Monetary policy eased sharply throughout 2001, and for the first half of the year, fiscal policy did not change very much. Yet the dollar continued to appreciate in the first half of the year. It then fell sharply during the third quarter, but rebounded in the fourth quarter and returned to its highs in February 2002. It then fell 12% during the next five quarters. Why did the dollar remain strong throughout the recession, and why did it then decline sharply in 2002 even though fiscal policy became more expansive?
Aggregate Demand and Aggregate Supply - End of Chapter Problem A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners, even though the U.S. aggregate price level remains the same. As a result, foreigners demand more U.S. aggregate output. Your study partner says that this represents a movement down the aggregate demand curve because foreigners are demanding more in response to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve.
Answer all parts For the following questions assume that the Fed is committed to price level stability. Initially, the exchange rate is 1.0. The US interest rate starts at 0.15 and the Fed increases the money supply by twenty percent (0.2) reducing the interest rate to 0.01. Assume that the economy completely adjusts after two years. Two years from now, the exchange rate is. 1.2 0.80 1.0 1.10 What is the change in the price level over the next two years 0.20 0.10 0.0 -0.10 Starting from today, what is the change in the interest rate over the next two years -0.10 0.00 0.14 0.10
With COVID-19, many economies suffered from severe recession. To save their economies, a mix of monetary and fiscal policies was used in 2020. Explain how monetary policy and fiscal policy could be used to stimulate an economy under a recession. State their limitations under the COVID-19.

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