In the short run, an unexpected increase in the money supply results inunemployment rate.INFLATION RATE (Percent)On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the increase in the moneysupply.17003912UNEMPLOYMENT RATE (Percent)15In the long run, the increase in the money supply results in.(relative to the economy's initial equilibrium),in the inflation rate and18in thein the inflation rate andin the unemployment rate 8. Monetary policy and the Phillips curveThe following graph plots the short-run Phillips curve for a hypothetical economy. The given point on the graph indicates the initial rates ofunemployment and inflation. Assume that the economy is currently in long-run equilibrium.Suppose the central bank of the hypothetical economy decides to increase the money supply,On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy.Hint: You may assume that the central bank's move was unanticipated.INFLATION RATE (Percent)52SR Phillips Curve9612UNEMPLOYMENT RATE (Percent)1518SR Phillips Curve?

How much money in an economy is alluded to as the money supply. Truth be told, the physical money…

In the short run, an unexpected increase in the money supply results in unemployment rate. INFLATION RATE (Percent) On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the increase in the money supply. 6 0 0 3 9 12 UNEMPLOYMENT RATE (Percent) 15 In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium). 18 in the inflation rate and ? in the in the inflation rate and in the unemployment rate

In the short run, an unexpected increase in the money supply results in unemployment rate. INFLATION RATE (Percent) On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the increase in the money supply. 6 0 0 3 9 12 UNEMPLOYMENT RATE (Percent) 15 In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium). 18 in the inflation rate and ? in the in the inflation rate and in the unemployment rate

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 the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force O The level of technological knowledge The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL
10 Within the Keynesian system explain the following: (a) the relationship between the effectiveness of monetary policy and the interest elasticity of investment. Will monetary policy be more or less effective the higher the interest elasticity of investment demand? Now explain the relationship between the effectiveness of fiscal policy and the interest elasticity of investment demand. (b) the relationship between the effectiveness of monetary policy and the interest elasticity of money demand. Will monetary policy be more or less effective the higher the interest elasticity of money demand? Now explain the relationship between fiscal policy and the interest elasticity of money demand.
Figure: 6-1 Price Level D 0000 Refer to Figure 6-1. How would an increase in the money supply move the economy in the long run? from C to B from C to A Quantity of Output from C to A to C again from C to D
Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? (Assume that the velocity of money is constant.) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It must increase by more than 20% It must increase by less than 20% C It stays the same d. It must increase by 20%
In the long run, technological progress Answer and increases in the money supply both make the price level rise. and increases in the money supply both make the price level fall. makes the price level rise, while increases in the money supply make prices fall. makes the price level fall, while increases in the money supply make prices rise. Question 23 If the price level rises above what was expected and nominal wages are fixed, then Answer production becomes less profitable so firms will hire fewer workers. production becomes less profitable so firms will hire more workers. production becomes more profitable so firms will hire fewer workers. production become more profitable so firms will hire more workers.
Suppose in 2017, the United Kingdom economy was at full employment. Nominal GDP was £2,665 billion, the real interest rate was 4 percent per year, the inflation rate was 3 percent a year, and the price level was 125. Calculate the nominal interest rate. In the long run, if the real interest rate remains the same but the inflation rate increases to 9 percent a year, how does the nominal interest rate change? The nominal interest rate is nothing percent a year. In the long run, if the real interest rate remains the same but the inflation rate increases to 9 percent a year, then the nominal interest rate ▼ decreases to remains unchanged at increases to ------ percent a year.
5. a) State whether the following are true or false and explain why. Frictional and structural unemployment are two words for the same thing. i. ii. If an economy is at full employment, the unemployment rate is zero. b) The AD (Aggregate Demand) curve shows the relationship between general price levels and real GDP. i. State and briefly explain the components of aggregate demand (AD). ii. State four factors that would cause • A fall in aggregate demand • An increase in aggregate demand c) i. What is the accelerator effect Explain the difference between the accelerator and the multiplier. Given that Country X has a nominal GDP of $100,000 and its real GDP is 11. 111.
9) Explain why inflation may tend to accelerate.
10. What does the AD curve represent economically? A. It represents the difference between actual real GDP and nominal GDP B. It describes how the Fed chooses short-run output based on inflation C. It describes how the velocity of money can fluctuate in the short run D. All of the above
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Gg.13.
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…