Price Level (CPI) LAAS Real GDP (trillions of 2007 dollars) Refer to Figure 11.9. Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising. Using the static AD-AS model in the figure above, the correct Bank of Canada policy for this situation would be depicted as a movement from B to C. A to B. C to B. A to E. OC to D.

Price Level (CPI) LAAS Real GDP (trillions of 2007 dollars) Refer to Figure 11.9. Suppose the economy is in short-run equilibrium above potential GDP, the unemployment rate is very low, and wages and prices are rising. Using the static AD-AS model in the figure above, the correct Bank of Canada policy for this situation would be depicted as a movement from B to C. A to B. C to B. A to E. OC to D.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Based on research conducted by the Department of Economic Analysis, the government and policy advisors of an economy believe that the full employment GDP is $7500 billion, and Pe, the overall expected price level is 118. In addition, the researchers estimate that the short run aggregate supply equation is Y = Ypot + 80 (P - Pe), where Ypot is the potential level of output. In 2016, the population was 400 million, and the structure of the economy was described by the following equations for household consumption behavior and taxes received: C = 100+ 0.8DI, and T = 0.25Y where all monetary values are in billions of dollars. Government spending was fixed at $1700 billion, and firm's investment behavior was fixed at $800 billion. Trading is allowed in this economy and in 2016, trading occurred such that the trade account was balanced. That is, net exports (X - IM) was equal to zero. (Question 1 of 20) What is the equilibrium level of GDP (in billions of dollars) in 2016? (report your…
4. Current Bank of Canada Policy in the Dynamic AD-AS Model Since September 2021 Canadian inflation according to the CPI has exceeded 5%. Consider the following statement from the Bank of Canada Governor Tiff Macklem in March 2022 While we expect inflation to come down in the second half of this demic eases, it is currently well above our target ... Higher oil prices have contributed to increased transportation costs, which, in turn, makes all goods more expensive. Food prices are being affected by extreme weather that has damaged crops across many regions. year as the pan- According to the above quotation, where do you think higher oil and food prices would appear in our dynamic AD-AS model? According to the model outlined in (1)-(5), what would you expect to happen to the endogenous variables Y;, Tt, it, and r¡? Explain your answer
Given information: Aggregate Demand function/equation: P = 1400 - 0.4Yr Aggregate Supply function/question: P = 200 + 0.2Yr Full employment real GDP = Yf = $10,000 P = CPI, Yr = Real GDP
Based on research conducted by the Department of Economic Analysis, the government and policy advisors of an economy believe that the full employment GDP is $7500 billion, and Pe, the overall expected price level is 118. In addition, the researchers estimate that the short run aggregate supply equation is Y = Ypot + 80 (P- Pe), where Ypot is the potential level of output. In 2016, the population was 400 million, and the structure of the economy was described by the following equations for household consumption behavior and taxes received: C = 100+ 0.8DI, and T = 0.25Y where all monetary values are in billions of dollars. Government spending was fixed at $1700 billion, and firm's investment behavior was fixed at $800 billion. Trading is allowed in this economy and in 2016, trading occurred such that the trade account was balanced. That is, net exports (X-IM) was equal to zero. Question 17 of 20) Now consider that in in the following year (2017), the government decided to implement a…
Inflation in Theoretica(pretend country) is currently below the target range of its central bank. What does this tell you regarding Theoretica’s likely output gap? Illustrate it using an AS-AD diagram, and briefly explain your diagram
Consider the following table from Source: 5220.0 Australian National Accounts: State Accounts, Table 7 - Tasmania, that gives nominal GSP (current prices) and real GSP (chain volume) for Tasmania. Tas GSP Tas GSP (Current (Chain Volume) 28931 Prices) Jun-2017 30019 Jun-2018 30263 30975 Jun-2019 31993 31993 Jun-2020 32904 32102 a. Calculate the implicit GSP price deflator. Feel free to use MS Excel. 6. Calculate the growth rate in Nominal GSP, Real GSP and the price deflator. c. What do you notice about the sum of the Real GSP and price deflator growth rates?
=0. An economy is described by the following equations: AD: SRAS: Okun's law: Y = 4000 + 2(M/P) Y = ybar + 100(P-P) (Y-ybar)/ybar =-2(u-ubar). Assume ybar 6000 and ubar=0.05. = A) Suppose that the nominal money supply has long been at M = 4000 and is expected by the public to remain constant forever. The equilibrium value of P is The equilibrium value of P is, The equilibrium value of Y is, The equilibrium value of u is The equilibrium value of x is, (2 points each) B) A totally unexpected increase in in the money supply occurs, raising it from 4000 to 5250. [Part B is for extra credit] The short run equilibrium value of P is The short run equilibrium value of Pe is_ The short run equilibrium value of Y is The short run equilibrium value of u is. The value of unanticipated inflation, which is defined as (P-P)/P, is, The value of the slope of the short-run Phillips curve is (2 points each)
In its announcement, the RBA Governor refers to “the importance of returning inflation to target.” As part of your Policy Brief, explain what is meant by the inflation target and how does an inflation target contribute to good economic management? Based on the news updates that we discussed in our lectures and tutorials throughout this course, what are some factors that are currently contributing to inflationary pressures in Australia and globally, and which part of the AD-AS model are these factors affecting? (2-3 sentences)
Price Level LRAS I о, он ог Real GDP SRAS, SRAS SRAS₂ ON=Natural Real GDP AD Refer to Figure 9-3. If the economy is in short-run equilibrium at point C, the (actual) unemployment rate is less than the natural unemployment rate. the (actual) unemployment rate is equal to the natural unemployment rate. the (actual) unemployment rate is greater than the natural unemployment rate. the relationship between the (actual) unemployment rate and the natural unemployment rate cannot be determined from the available information.
As the economy slide into the Great Depression, many banks failed and the nation’s money supply decreased. Present an analysis (using an AS-AD diagram, and labor market diagram) that explains why a decrease in the money supply caused by bank failures can take an economy that is at full employment and move it into a serious recession. In particular, explain how a significant decrease in the nation’s money supply might be expected to impact the employment level, unemployment rate, price level, output level, and real wage level.
300 OA: B OB;B O C;D (1) OB:C D LM, LM₂ IS₂ IS₁ Y P3 P2 PL P Y3 Y2 (2) с AD₁ YI Y2 Y3 Refer to the figure above. If the economy is initially at point A in both panels, and the rate of inflation slows down, then the economy will be at point in panel 1 and point in panel 2. YI AD, AD₂ Y
Question 17 If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent, then next period's short-run aggregate supply curve might be TT= 5+2 (11-15) TT = 5-0.5 (13-15) TT = 4 +0.5 (13-15) TT = 5 +0.5 (13-15)