Part I. Conceptual: True, False or Uncertain. State whether each of the following statements istrue, false or uncertain. Explain your answer. While these questions are mainly conceptual, usediagrams, equations, or models whenever deemed necessary to clarify or substantiate your answers.1.1. Nominal wage rigidity is a necessary condition for nominal demand shocks to have an impacton real output.1.2 The crowding out effect is stronger if the interest sensitivity of money demand is lowerirrespective of the central bank's monetary policy.

Wages: It refers to the income of the people that is used by the people for buying various goods and…

Answered: Part I. Conceptual: True, False or…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please see below. These are true or false questions. Need help with all of these please and thank you. T/F Questions -As the general price level changes, substitution bias in price indices results in underestimation of the change in the cost of living. -A core inflation index is typically calculated by taking the CPI and excluding volatile economic variables. -Inflation can help nullify problems created by sticky nominal wages, because with inflation real wages can fall even if nominal wages are constant.
State whether the following statements are true, false, or uncertain and explain. -In the sticky-price model, if the economy is in a liquidity trap, the price level, P1, will display a tendency to fall. -Over the past 40 years, the average inflation rate was 3 per cent in country A and 22 per cent in country B. Country B must have had a lower average nominal interest rate than country A.
Assume that the current demand for goods depends on expectations in the IS-LM model. A monetary contraction in the current period will cause a leftward shift in the IS curve if: O O current and expected future real interest rates are positively related current and expected future real interest rates are negatively related monetary policy cannot affect, directly or indirectly, the position of the IS curve in the current period the central bank is expected to reverse any current movements in monetary policy in the future current and expected future real interest rates are unrelated
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
2. The inflation-unemployment relationship The following graph shows the combinations of unemployment and inflation that existed in the United States for selected years between 1961 and 1969. Click on any blue point (circle symbol) on the graph to get its exact coordinates. You can also use the black point (cross symbol) to find the coordinates of other points along the curve. (Note: You will not be graded for any adjustments made to the graph.) INFLATION RATE (Percent) 1969 5.2 4.5 1988 85 1967 20 1.5 10 0.5 1960 1984 1963 1981 0 2.0 3.5 40 4.5 5.0 5.5 GO 4.5 7.0 UNEMPLOYMENT RATE (Percent)
Kk.132.
For this question, assume that the expected rate of inflation is a function of past year's inflation. Also assume that the unemployment rate has been greater than the natural rate of unemployment for a number of years. Given this information, we know that the inflation rate will be approximately equal to the natural rate of unemployment. А. the rate of inflation will approximately be equal to zero. В. C. the rate of inflation should steadily decrease. Op the rate of inflation should steadily increase over time. the rate of inflation should neither increase nor decrease. Е.
The following graph shows a short-run Phillips curve for a hypothetical economy. Show the short-run effect of a contractionary monetary policy by dragging the point along the short-run Phillips curve (SRPC) or shifting the curve to the appropriate position. (? 12 11 10 SRPC 9 8 7 3 SRPC 2 1 1 2 3 4 6. UNEMPLΟΥΜΕNT (Percent) INFLATION RATE (Percent) LO

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