QUESTION 1Consider the IS curve Ỹ₁=ā-b(R₁-r) and suppose ā=0¹ b=1, R₁ =r=5%, and the real interest rate falls to R₁' = 4%. In thistscenario, the economy would, in the short-run:a. move from its long-run equilibrium to 1 percent below its potential.b. move from its long-run equilibrium to 1 percent above its potential.c. remain at its long-run equilibrium.d. have reduced output.e. move from 1 percent below its potential to its long-run equilibrium.QUESTION 2According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession causedin aggregate demand, leading toin output relative to potential output.a. an increase / a reductionO b. a reduction / a reductionO c. a reduction / an increased. an increase / an increase

IS-MP framework: IS-MP model is widely used to denote the simultaneous equilibrium in product and…

QUESTION 1 Ỹ₁=ā-b(R₁-r) and suppose a=0₁ b=1, R₁ =r=5%, and the real interest rate falls to R' = 4%. In this Consider the IS curve t scenario, the economy would, in the short-run: O a. move from its long-run equilibrium to 1 percent below its potential. Ob. move from its long-run equilibrium to 1 percent above its potential. O c. remain at its long-run equilibrium. O d. have reduced output. O e. move from 1 percent below its potential to its long-run equilibrium. QUESTION 2 According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession caused in aggregate demand, leading to in output relative to potential output. O a. an increase / a reduction O b. a reduction / a reduction O c. a reduction / an increase O d. an increase / an increase

QUESTION 1 Ỹ₁=ā-b(R₁-r) and suppose a=0₁ b=1, R₁ =r=5%, and the real interest rate falls to R' = 4%. In this Consider the IS curve t scenario, the economy would, in the short-run: O a. move from its long-run equilibrium to 1 percent below its potential. Ob. move from its long-run equilibrium to 1 percent above its potential. O c. remain at its long-run equilibrium. O d. have reduced output. O e. move from 1 percent below its potential to its long-run equilibrium. QUESTION 2 According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession caused in aggregate demand, leading to in output relative to potential output. O a. an increase / a reduction O b. a reduction / a reduction O c. a reduction / an increase O d. an increase / an increase

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The AS curve shifts to the left when O All listed options are correct. the cost of production rises the government does expansionary fiscal policy O net exports rises O we lower interest rates
The demand for Peet's Coffee over a week should be more elastic than the demand for Peet's Coffee over a year. True False
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1. A change in autonomous spending results to a shift of the LM curve either to the left or right. O a. False; movement along the IS curve O b. False; movement along the LM curve O c. True O d. False; shift of the IS curve 2. Which of the following statements is true? 3. O a. The goods and money markets can never be in equilibrium. O b. The goods and money markets are in equilibrium at the points where the money market is in equilibrium. O c. The goods and money markets are in equilibrium at their point of intersection only. O d. The goods and money markets are in equilibrium at the points where the goods market is in equilibrium. Which of the following describes the steepest investment schedule? O a. 1-450-8(3) O b. 1=450-2(3) O c. 1=450-9(3) O d. 1=450-5(3)
3. Suppose the Bank of Canada reduces interest rate in the economy. Starting from a long-run equilibrium, use a graph to show what will happen to price level, real GDP, and employment in the short-run. Also, explain how output can return to the natural rate in the long-run without any government intervention.
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3. Explain the wealth effect or the interest rate effect of why the aggregate demand (AD) curve is downward sloping.
28. Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo, and AD1 and AS1 represent changes, which of the above graphs depict the economy's self-correcting mechanism at work? a) Figures A & B b) Figures A & C c) Figures C & D d) Figures B & D
Price Level 8 7 6 X 50 4 3 2 1 0 2 4 AS AD 6 8 10 12 14 16 18 20 Real GDP (in billions of dollars per year) billion. QE Instructions: Enter your responses as a whole number. a. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ Suppose that full-employment GDP is $13 billion. b. The real GDP gap is $ c. Aggregate demand must shift (left or right) by $ billion. billion to achieve the full-employment equilibrium.
A Moving to another question will save this response. Question 21 An increase in wealth from a substantial increase in stock prices will move the economy along a fixed aggregate demand curve. O A. true. O B. false. A Moving to another question will save this response.
What do you expect will happen to the price level and real GDP in the short run when the bank of Canada buys domestic government bonds given a positively sloped SRAS curve? Select one: O a. Both the price level and real GDP will cross out increase. O b. Both the price level and real GDP will decrease. cross out O c. The price level will increase while real GDP cross out will decrease. O d. The price level will decrease while real GDP cross out will increase. O e. There is no change either to the price level or cross out the real GDP