Let's assume that in the Asgardian's model of the economy the natural rate of interest is denoted as ẞ and it varies over time, so now it has to be written as ft. b) How would a shock to ßt affect output, inflation, the nominal interest rate, and the real interest rate?
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Could you explain me the solution to part b) please
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- In section 5.2 we showed that if the money stock follows a mst-order autoregressive process with c (a) Give the economic intuition behind this result. (b) Suppose that the growth rate of money follows a stable mst-order autoregressive process. Solve for the process for the price level. (c) Does the same characterization hold with the addition of the words "relative to trend" following high and low?Question1.A.write the short nots under each statement: 3. The main differences between withdrawals and injection in macroeconomics are: ……………………………………………………………………………………………………………………………………………………………………………………………………. 4. The main differences between gross domestic product and gross national product is: …………………………………………………………………………………………………………………………………................................................................................................... 5. The differences between contraction and expansion in aggregate demand is : ..................................................................................................................................................................Economics Suppose that the effects of COVID-19 on the economy can be thought of as a permanent negative productivity shock, i.e., a permanent decrease of the production owing to lower total factor productivity. What does the model predict will happen to the following variables: (1) real interest rate, (2) real output), (3) real consumption, (4) real investment, (5) labor input? For each variable explain why COVID-19 would have the predicted effect.
- Consider the Keynesian sticky wage model. Assume that the economy is operating close to, but not at, its zero lower bound (ZLB). Discuss the following: 1. Could a negative shock to the IS curve make the ZLB bind? Explain and illustrate graph- ically. 2. Could a shock to current productivity z make the ZLB bind? What would need to be the sign of this shock to make the ZLB bind? 3. In the data, in most episodes where the ZLB binds (the US in the wake of the Great Recession, Japan during the 1990s, and the US during the Great Depression), output is low. Given this, would a supply shock as the reason for a binding ZLB make empirical sense? 4. Intuitively, explain why changes in government spending have a bigger effect on output at the ZLB than away from it.Does interest (nominal or real) impact the consumption function in any way? According to literature consumption in the IS-LM model is affected by changes in output Y and taxes T. But in this question as there is an i for the interest included in the equation does that mean (as I am given a nominal interest rate), use it in my calculations? Or is it just written there to test my knowledge?A majority of economists believe that in the long run, real economic variables and nominal economic variables behave independently of one another. For example, an increase in the money supply, a no long-run effect on the quantity of goods and services the economy can produce, a and nominal variables is known as VERTICAL AXIS However, in the short run, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggregate supply (AS) diagram-it needs appropriate labels for the axes and curves. In the questions that follow you will identify some of the missing labels. The aggregate price level. HORIZONTAL AXIS AS variable, will cause the price level, a AD (?) variable, to increase but will have variable. The distinction between real variables curve shows…
- The theory of macroeconomic fluctuations is also the short run model of the macroeconomy and assumes that business firms will supply any amount of output demanded by the economy TRUE OR FALSE?To study macroeconomics, one needs various models with different assumptions about the flexibility and/or stickiness of price levels. This is because: A.) the price flexibility is a short-run phenomenon while, the price stickiness is a long-run phenomenon. B.) the economy behaves so differently depending on how much time has passed after a demand shock. C.) various government policies are useless to eliminate the effects of an unexpected demand shock. D.) the economy behaves similarly to demand shocks regardless of the length of time.A number of macroeconomic variables decline during recessions. One of these variables is the GDP. What other variables, besides real GDP, tend to decline during recessions? Given the definition of real GDP and its components, explain the declines in these economic variables which are to be expected. Empirical studies indicate that the long-run trend in real GDP of the USA has an upward trend. How is this possible given business cycles and macroeconomic fluctuations? What factors explain the upward trend in spite of the cycles?
- The graph below depicts an increase in aggregate demand due to an increase in net exports. This increase in aggregate demand is depicted as a shift from AD to AD₁. Price Level LRAS X AD Real GDP AS AD Tools AS, 0 a. In the long run, aggregate supply will adjust to move the economy back to the full-employment level of output. Show this shift using the graph above. Instructions: Use the tool provided "AS₁" to show the movement back to full-employment output. Plot only the endpoints of the line, keeping AS, parallel to AS with the appropriate Intersection (2 points total). b. How does the new long-run equilibrium compare to the Initial full-employment level before the Increase in net exports? O The price level is higher, but output is lower. O The price level is lower, but output remains the same. O The price level is lower, but output is higher. O The price level is higher, but output remains the same.suppose a Keynesian macroeconomic model is characterized with the following equations: Y = C + I + G Goods markets C = C = 320 + 0.8YdYd = Y − TI = 40 − 40rG = 80T = 50 Money marketsMoney demand:(M/P)d = 500 + 0.8 − rMoney supply: MSP = 800Derive IS and LM equations and derive equilibrium income level and interest rate.According to the "4-Quadrant Model" (4QM), which of the following statement is correct? O If there is a positive demand shock in the space market, the housing rent is going to increase in the short run, and will be lower than the current rent in the long run. If there is a positive demand shock in the space market, the housing price is going to decrease in the short run, and increase in the long run. If there is a positive demand shock in the asset market, the housing rent is going to decrease in the long run. O If there is a positive demand shock in the asset market, the housing price is going to decrease in the short run, and will be lower than the current price in the long run.
