Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Assume that a country's economy is in a short-run equilibrium and the actual unemployment rate is lower than the natural rate of unemployment. (a) Using a correctly labeled graph of the long-run aggregate supply curve, short-run aggregate supply curve, and aggregate demand curve, show each of the following. (i) Current price level, labeled PL₁, and current output level, labeled Y₁ (ii) The full-employment output level, labeled YF (b) Assume the country's banking system has ample reserves. What monetary policy action should the country's central bank use to move the economy toward its long-run equilibrium? (c) Draw a correctly labeled graph of the country's reserve market, and show how the central bank's action to move the economy toward its long-run equilibrium affects the policy rate in the short run.

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Assume that a country's economy is in a short-run equilibrium and the actual unemployment rate is lower than the natural rate of unemployment. (a) Using a correctly labeled graph of the long-run aggregate supply curve, short-run aggregate supply curve, and aggregate demand curve, show each of the following. (i) Current price level, labeled PL₁, and current output level, labeled Y₁ (ii) The full-employment output level, labeled YF (b) Assume the country's banking system has ample reserves. What monetary policy action should the country's central bank use to move the economy toward its long-run equilibrium? (c) Draw a correctly labeled graph of the country's reserve market, and show how the central bank's action to move the economy toward its long-run equilibrium affects the policy rate in the short run.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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