ReviewViewHelpGrammarlyAaBbCcDc AaBbCcDc AaBbC AaBbCcC AaB AaBbCcC AaBbCcD AaBbCcD AaBbCcD AaBbCcDc AaE三三、、田、I Normal1 No Spac. Heading 1 Heading 2Subtle Em. EmphasisIntense E..StrongTitleSubtitleStylesParagraphLevel of outputAInflationVPC33rate, n31.8PC 730 629428.2271315534171918MR6.11281012141620Output, YTime periodC Level of output32.5InflationVPC31.8rate, n31.1PC T30.429.7MR291.171312Time period192011151648101418Output, YFigure 14 Policy response to a demand shockFigure 14(A,B,C and D above) shows four charts labelled A to D depicting aspects of a positivepermanent demand shock. Charts B and C are from the macrosimulator, while Charts A and Dshow MR curves. Which two of these charts are consistent with the policy response from acentral bank that has a strong inflation aversion? (Choose two answers.)ISelect two:A: Chart AB: Chart BC: Chart CD: Chart DPHILIPSndyno jo jane

Positive demand shock in the economy refers to a sudden surge in demand for goods and services in…

Figure 14 Policy response to a demand shock Figure 14(A,B,C and D above) shows four charts labelled A to D depicting aspects of a positive permanent demand shock. Charts B and C are from the macrosimulator, while Charts A and D show MR curves. Which two of these charts are consistent with the policy response from a central bank that has a strong inflation aversion? (Choose two answers.) Select two: A: Chart A B: Chart B C: Chart C D: Chart D

Figure 14 Policy response to a demand shock Figure 14(A,B,C and D above) shows four charts labelled A to D depicting aspects of a positive permanent demand shock. Charts B and C are from the macrosimulator, while Charts A and D show MR curves. Which two of these charts are consistent with the policy response from a central bank that has a strong inflation aversion? (Choose two answers.) Select two: A: Chart A B: Chart B C: Chart C D: Chart D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to the Figure B. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely: 1) cause inflation. 2) increase unemployment. 3) lower prices, but leave output unaffected. 4) reduce both prices and output.
Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility.Using a graph of aggregate demand and supply EXPLAIN how the credibility of each country’s central bank affect economic outcomes, if both countries are hit with the same a) positive aggregate demand shock? b) negative temporary aggregate supply shock?
What kind of problem is the U.S. economy facing? Give one possible reason why this problem may exist. State whether the Fed should use fiscal policy or monetary policy to address the situation. Given the stated policy in your answer to question #2, indicate what specific policy tool you would recommend as the appropriate course of action and why you are recommending this tool. Policy Implementation: Utilizing the figure above as your starting point, illustrate (graph) the macroeconomic situation of the United States after a successful implementation of the policy tool you’ve recommended. What are the effects on the macroeconomy on GDP and the aggregate price level?
Explain the impact effect of this shock on output, inflation, and the real interest rate. Explain the dynamic response of output, inflation, and interest rates in subsequent periods. Does the economy converge back to the same long-run equilibrium? Explain how the central bank responds to inflation and the importance of the monetary authority following the Taylor principle. How would your answer to (B) change if the shock lasted for several periods (instead of one period) before reverting to zero?
MA4. 13. If the equation for a country's Phillips curve is π = 0.05 – 0.8(u – 0.05), where π is the rate of inflation and u is the unemployment rate, what is the short-run inflation rate when unemployment is 3 percent (0.03)? A) .066 B) -.056 C) -.066 D) .056 11. The aggregate supply equation is Y = Y + α(P – EP). Assume that Y is 2,000, α = 200, P = 1.12 and EP = 1.00. What is the value of Y? A) 2,232 B) 2,024 C) 2,400 D) 2,012 9. If policymakers announce in advance how policy will respond to various situations but then renege on their announcements, this a problem of: A) policy by rule. B) policy by discretion. C) time inconsistency of policy. D) monetary policy. 10. According to the sticky-price model, output will be above the natural level if: A) firms expect a high price level and the demand for goods is high. B) the proportion of firms with flexible prices equals the proportion of firms with sticky prices. C) the price level is above the…
Using the ASAD graph and starting in long run equilibrium YA = Y* (see the model example in the textbook Figure 13.11) take each of following shocks one by one in separate graphs and decide if the event falls into the real shock (LRAS) category or aggregate demand (AD) shock category. Then graph each. Remember that “shocks” include both good and bad events and the graph should show that in the short run the economy is either that YA < Y* or YA > Y* A fall in the input price of oil A rise in consumer optimism A cut in business taxes if they buy new equipment Foreigners buy fewer US made goods. Consumer Fear New inventions (A) occur at a faster pace than usual A faster money growth rate A permanent cut in income taxes
In the Friedman-Lucas money surprise model, there is a negative money demand shock. Neither private sector economic agents nor the central bank can observe the shock directly. Assume that the central bank is committed to money growth targeting. 1. How will it affect the labour, goods and money markets? Show graphically. 2. Argue that the shock could result in inefficient outcomes. Explain using diagrams.
Money Surprise Model (25%) Suppose in the Friedman-Lucas money surprise model, there is a negative TFP shock. Neither private sector agents nor the central bank can observe this shock directly. The central bank is committed to interest rate targeting. a- Using labour market diagram, draw the impact of this shock on the labour demand holding the interest rate constant. Provide an explanation. b- Argue that what happened in part (a) will affect the goods market. c- What action the central bank will take? How will this intervention affect the labour supply and goods market? You do not need to draw any diagrams d- Draw diagrams (labour market, goods market, and money market) to illustrate the final stage of the economy after the shock.
Please write down a sentence or two for each one that explains the concept. Please include any formulas and rules that I should know for every subtopic aside from those two sentences. I am studying for an exam and I want to understand these concepts throughly.
All of the following statements about sticky prices are true except: Select one: a. for studying year-to-year fluctuations, most macroeconomists believe that price stickiness is a better assumption than is price flexibility b. the sticky-price model describes the equilibrium toward which the economy slowly gravitates c. in the short run, some wages and prices are sticky d. magazine publishers tend to change their newsstand prices only every three to four years
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Suppose the Phillips curve in Country A is estimated to be ??=???−0.25(??−?∗?)πt=πte−0.25(ut−ut∗)(supplied in picture) The natural rate of unemployment in the year 2020 equals 3%. Inflation in the year 2020 is expected to be around 1%. The Okun’s coefficient in Country A equals 2. The central bank of Country A is considering three possible monetary policy scenarios for the year 2020. Scenario 1: the central bank performs a monetary contraction, and the inflation rate becomes 0.5%. Scenario 2: the central bank performs a monetary expansion, and the inflation rate becomes 1.5%. Scenario 3: the central bank keeps monetary policy unchanged, and the inflation rate matches expected inflation and equals 1%. For each of these policy scenarios, 1) Determine the corresponding rate of cyclical unemployment in 2020 2) Determine the actual unemployment ??ut that would result in 2020 3) Use Okun’s law to determine the corresponding…