11:33K2 of 3• moodle.federation.edu.auQuestion 1a) Give the definition of GDP and explain what items are not included in its calculation?What is the current environment in the USA and Australia?b) Define unemployment and its measurement. What is the current environment in theUSA and Australia?c) Define inflation and its measurement. What is the current environment in the USAand Australia?Question 2Assume that an economy is initially operating at the natural rate of output (full employmentoutput). Use the AD-AS model to illustrate graphically the effects on price and output of aincrease in government spending and an increase in the cash rate. Explain your assumptionswith respect to the range of aggregate supply of your analysis.Question 3Explain in detail the process of Monetary Policy transmission of an increase in the cashinterest rate. Use relevant graphs to describe how a Central Bank's action on the interest cashrate ripple through the economy and lead to the target policy goal. (Three connected diagramsshould be used: (1) money supply and demand (2) investment demand schedule (3) AS/ADdiagram. Interest rates is the variable that connects the first and second diagram)Question 4Using the World Bank's World Development Indicators database,https://databank.worldbank.org/home.aspx,a) Complete the following table.GDP per capita (current)AustraliaChinaIndiaU.S.GDP growth rateAustraliaChinaIndiaU.S.Inflation rateAustraliaChinaIndiaU.S.2005 2007 2010 2015 2019b) Produce a plot for each variable (GDP, gdp growth, inflation) comparing the fourcountries.Jerich86+4

Monetary policy refers to the policy adopted by the monetary authority of a country to control…

Answered: Question 3 Explain in detail the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What kind of problem is the U.S. economy facing? Give one possible reason why this problem may exist. State whether the Fed should use fiscal policy or monetary policy to address the situation. Given the stated policy in your answer to question #2, indicate what specific policy tool you would recommend as the appropriate course of action and why you are recommending this tool. Policy Implementation: Utilizing the figure above as your starting point, illustrate (graph) the macroeconomic situation of the United States after a successful implementation of the policy tool you’ve recommended. What are the effects on the macroeconomy on GDP and the aggregate price level?
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
1A.) What do researchers mean when they ask “Why does monetary policy have real effects on the economy?" 1B.)Use the evidence in the table (image) to discuss the research main findings and its implications for macroeconomic policy.
Suppose the Federal Reserve (the Fed) announces that it is lowering its target interest rate by 75 basis points, or 0.75%. It would achieve this by ______the ________. Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money. The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: Because there is__________money in the financial system, there is an excess _________ money at the initial equilibrium interest rate. Individuals and businesses adjust their asset portfolios by _______bonds. As a result, the price of bonds_________ , and the interest rate______ . This process continues until the new equilibrium interest rate is achieved.
Recently the Fed has implemented tight money policy in an effort to reduce inflation. Graphically demonstrate (use 3 graphs) how this tight money policy would restrain inflation and otherwise impact the macroeconomy.
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that, due to increased instability in the financial markets, a decrease in investor and consumer confidence occurs. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose the Federal Reserve wants the economy to return to full-employment as quickly as possible. Should the Fed intervene? If so, show the impact of successful monetary policy on your graph. Label this new equilibrium point "3."
5
Assume that the economy is currently in short run equilibrium but experiencing a recessionary gap. Graphically illustrate the problems, identify the combination of monetary policies that the Federal Reserve would pursue to correct problem, and then graphically illustrate and explain how these monetary policies affect (1) the Market for Reserves, (2) the Market for M1, and (3) the Market for Real Goods and Services (AD-AS). Your last graph should depict the final solution and end with a conclusion.
Question Now we introduce banks that will act as liquidity providers in the economy. Suppose that banks are able to issue private IOU's, such that individuals deposit goods with the bank and the bank can promise a return on the deposit. We start by assuming that there is no reserve requirement or lending by the Central Bank. (a) Suppose a young individual wants to use one consumption good to acquire money. What return does the bank need to promise the individual to have them deposit the good with the bank instead? (b) Suppose that when the individual deposits a good with the bank, the bank uses this good to create capital. Further, suppose that when the bank offers a return on deposits that is equal to the real rate of return on money then the individual will choose to deposit with the bank instead of acquiring money. A young individual in period t deposits one good with the bank when young. Suppose no young individuals in period t+1 make deposits. How does the bank pay the young…
(c) Briefly explain the quantity theory of money and how it is related to inflation.
Preface: The commercial banking sector through its role of granting and creating credit in the money creation process has a large influence on the overall macroeconomy. Specifically, their directing of credit has a large impact on what type of transactions happen in the economy. The majority of loans that banks grant go towards existing assets--mainly real estate. This means that the majority of banks' credit creation goes towards unproductive transactions or transactions which don't increase GDP (The purchase and sale of existing real estate assets does not add to GDP). Write at least two paragraphs answering the following questions: 1. Given that the majority of created credit goes towards existing assets, what affect do you feel this has on asset price inflation? 2. Why do you think that banks grant the majority of their loans to finance the purchase of existing assets or unproductive transactions? (Remember banks are profit maximizing firms)

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