LRAS SRASI SRAS2 P1 P2 P3 AD Question: The appearance of the long-run aggregate-supply (LRAS) curve O indicates that Y1 is the natural rate of output. O is consistent with the concept of monetary neutrality. O is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate- supply curve is SRAS1. O All of the other answers are correct.

LRAS SRASI SRAS2 P1 P2 P3 AD Question: The appearance of the long-run aggregate-supply (LRAS) curve O indicates that Y1 is the natural rate of output. O is consistent with the concept of monetary neutrality. O is consistent with the idea that point A represents a long-run equilibrium and a short-run equilibrium when the relevant short-run aggregate- supply curve is SRAS1. O All of the other answers are correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the real sector, the following data are available:Consumption Function C = 100 + 0.75YInvestment function I = 60 - 200r Meanwhile, the Monetary sector provides the following data:The amount of money in circulation = 500Money demand function for Transactions and just in case L1 = 0.2YMoney demand function for Speculation L2 = 428 - 400r Question: a. Determine the interest rate at the time of the General Equilibrium, and what is the equilibrium national income b.Prove that the General Equilibrium really exists! c. The general equilibrium conditions mentioned above can be expressed in a graph
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The economy is hit by the Covid-19 pandemic and affects the short-run aggregate supply. Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: (a) The central bank responded by printing more money.
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B. Consider the following model where the monetary policy will be the only policy variable affecting demand for output. For expositional purposes the income velocity of money is held constant. With these assumptions the aggregate demand for output can be written in logs as: mt + v = Pt+ Yt The above equation is the equation of exchange in logs (equation that addresses the relationship between money and price level, and between money and nominal GDP. The equation tells us that total spending (M x V) is equal to total sales revenue (P x Y)). To complete the model we need to add the aggregate supply equation and a money supply rule. yt = y'+ a(pt - Et-1pt1) (2) mt = Byt-1+Et (3) Given that agents form expectations rationally, find a solution for (i) yt and (ii) pt. Is there any scope in this model for the policy authorities to influence the output through systematic stabilisation policy? Explain your answer.
Exhibit: Economic Adjustments If the economy is at point b, the Federal Reserve can close the output gap Group of answer choices by pursuing an expansionary monetary policy to raise the interest rate and decrease short run aggregate supply. by pursuing a contractionary monetary policy to drive down the interest rate and decrease aggregate demand. by pursuing an expansionary monetary policy to drive down the interest rate and decrease short run aggregate supply. by pursuing a contractionary monetary policy to raise the interest rate and reduce aggregate demand.P/bar (per year) Price level LRAS C d a b SRAS2 SRASI Y₁ Y₁ Yb ADI AD2 Real GDP per year
Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility. Assume that in 2020, both countries are hit with the same COVID-19 shock.If the both central banks announce an autonomous easing policy to reduce the unemployment rate,How does the credibility of each country’s central bank affect the speed of adjustment of the aggregate supply curve to policy announcements? How does this result affect output stability?
Assume that the IS-MP model on the right shows an economy that was in long-run macroeconomic equilibrium. Then, there was a significant positive demand shock 1.) Using the 3-point curved line drawing tool, show the effect of the positive demand shock. Properly label your curve 2) Using the line drawing tool, show how the Fed might respond to restore long-run equilibrium Properly label your curve Carefully follow the instructions above, and only draw the required objects Real interest rate Y=yP 10 MP₁ IS, Output gap odu
Explain and demonstrate graphically that if the central bank pursues targeting the interest rate, it is likely to lose control over a monetary aggregate. Include correctly labled diagrams.
4. Inflation and interest rates The following table shows the average nominal interest rates on six-month Treasury bills between 1997 and 2001, which determined the nominal interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1997 to 2001. (All rates are rounded to the nearest tenth of a percent.) Year 1997 1998 1999 2000 2001 Nominal Interest Rate (Percent) 5.2 4.8 4.8 5.9 3.4 6.0 Inflation Rate (Percent) 2.3 1.5 2.2 3.4 Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modified September 23, 2019, accessed September 24, 2019, https://fred.stlouisfed.org. 5.0 2.8 On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1997 to 2001. Next, use the green points (triangle symbol) to plot the real interest rates for those years. Nominal Interest Rate ?