QUESTION 19 Which of the following is not true for the IS/LM model? Interdependency between the goods and money markets Keynesian demand-side model Interest rates are a function of investment Fixed price, short-run model QUESTION 20 In terms of the AD/AS model, the Covid-19 pandemic caused a demand-side shock only, with a fall in aggregate demand supply-side shock only, with a fall in aggregate supply O impossible to say demand-side and a supply-side shock, with falls in aggregate demand and aggregate supply

QUESTION 19 Which of the following is not true for the IS/LM model? Interdependency between the goods and money markets Keynesian demand-side model Interest rates are a function of investment Fixed price, short-run model QUESTION 20 In terms of the AD/AS model, the Covid-19 pandemic caused a demand-side shock only, with a fall in aggregate demand supply-side shock only, with a fall in aggregate supply O impossible to say demand-side and a supply-side shock, with falls in aggregate demand and aggregate supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a modified aggregate supply function which takes account for the emergence of random business cycle shocks (ce) with Ele] - O in the sense that Ye - R - R ++ 6 The loss function is the same as in exercise 1: L-(n - k)* +(m)? Notation: €: random shock; E[e,]: expected value of e; b: constant parameter, all other variables see Exercise 1. Having considered the scenario above complete the following tasks: a) Derive the central bank's preferred inflation rate and explain.
What happens to the AS/AD and IS/LM models when: a) Covid-19 initially hits the economy b) Central banks introduce monetary policy measures c) Governments introduce fiscal policy measures
The Covid-19 crisis and lockdown has been a supply-side shock to the South African economy. In response, the government offered a R500bn stimulus package to help cushion the blow. Use the AD-AS model, in conjunction with the IS-LM-BP, to explain the supply and demand dynamics of the shock and policy response. Where will equilibrium income and prices settle? Draw the graphs and explain the complete chain reaction, VuwaniAfrica @matenzhes Apr 22, 2020 ... Summary of RS00bn South Africa stimulus package: R200bn: Loan guarantee scheme R100bn: Jobs protection/creation R70bn: Tax relief R20bn: PPE R20bn: Municipalities RS0bn: Social grants R40bn: UIF (payment for layoffs) Ria livhuwa @CyrilRamaphosa,
Question 45 of ao One policy response to the economic slowdown in Canada in 2008-2009 wan to increase money grwth. This policy response can be represented in the IS-LM model by shifting the IS: right curve to the LM; right LM: left IS; left
Question The Bank of Canada introduces an unexpected increase in the money supply. Answer the following: (a) Use the IS-LM model to determine how the policy ffects national income, Y, and real interest rates, r, in the short run. (b) Based on your answer from part (a), how do consumption, C, and investmentL change? Explain. (c) Now use the AD-AS model to illustrate how the policy affects national income in the short run. (d) How does the magnitude of the change in national income in part (c) compare with the magnitude of the change in part (a)? If they differ, what accounts for the difference? Explain. (e) Use the AD-AS model to briefly explain how the economy adjusts to a new long- run equilibrium. wer here. Please write out your answer and scan and upload it at the end of th
Explain in words how investment multiplier and the interest sensitivity of aggregate demand affect the slope of the IS curve. Furthermore, Explain in words how and why the income and interest sensitivities of the demand for real balances affect the slope of the LM curve. According to the IS–LM model, what happens to the interest rate, income, consumption, and investment under the following circumstances?a. The central bank increases the money supply.b. The government increases government purchases.c. The government increases taxes.
Arrange these statements in sequence to explain why the short run aggregate supply (SR AS) curve slopes upward. Suppositions as a starting point Conclusion as to why the SR AS curve slopes upward Answer Bank At the macroeconomic level, the increase in aggregate demand (AD) corresponds to a shift in the firms' demand curve, whereas the firms'supply curve remains fixed. Since customers are demanding more of the firms'product, the firms' demand curves increase, which increases prices and output. The firms'willingness to supply more output at a higher price at a micro level shows a positive relationship, which is then also reflected at the macro level with an upward sloping SR AS curve.
Use the IS-LM model to describe the short-run effects of an increase in the money supply on the equlibrium output and real interest rate. Assuming the economy is in a long-run equilibrium before the shock, also explain how the price level changes over time, and what happens to the economy in the long-run. Use the AS-AD framework for this part of the question. Add diagrams to illustrate the answer - you can use the attachment feature of the answer editor to upload your chart.
Consider the ASAD model of a closed economy with zero ongoing inflation in the medium run. The aggregate demand curve is determined by the IS-LM model. The aggregate supply curve is derived from the imperfect competition model of the labour market (the WS-PS model where firms have perfect foresight, monopoly power, and use a linear technology with constant returns to labour; workers expect zero inflation in every period, and their wage requests are an increasing function of wage-push factors like unions' bargaining power). The economy is initially in the potential equilibrium. Assume a permanent increase in the bargaining power of unions. Fiscal and monetary authorities perfectly forecast this shock and decide to neutralize immediately its consequences for the price level by enacting a “policy of price stability” that successfully eliminates all fluctuations in the general price level in every period. Therefore, the economy is subject to two simultaneous shocks – the increase in…
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In the Neoclassical-Keynesian Synthesis ASAD model, let us suppose that the interest rate has no effect on real money demand. What does this imply for (1) the slope of the IS curve, for (2) the slope of LM curve, and for (3) the slope of the AD curve? (1) The slope of the IS curve – (2) The slope of the LM curve – (3) The slope of the AD curve –
In the AS/AD Model, a decrease in the financial friction will Select one: O a. Shift the aggregate demand curve to the right. Ob. O b. Shift the aggregate supply curve to the left. Shift the aggregate supply curve to the right. O c. O d. Shift the aggregate demand curve to the left.