A. Draw the baseline long run steady state equilibrium. Suppose this equilibrium existed in September of 2021B. Suppose the Federal Reserve undertakes expansionary monetary policies after September of 2021. What will happen to the output, employment and price level in the economy in December 2021 (assuming that monetary policies take a few months to show results) ? How will you change your graph in response (you need to show a shift of some curve)?C. Will you let market adjustment work? Show on the graph how market adjustment will affect the economy in May 2022 compared to where the economy was in December 2021? Question 5Consider a baseline long run steady state equilibrium whereoutput is 20 trillion dollars, and the price level is 100. Note:price expectation is the same as the price level at the longrun steady state equilibrium & unemployment is 5% orlowerA. Draw the baseline long run steady state equilibrium. Supposethis equilibrium existed in September of 2021B.Suppose the Federal Reserve undertakes expansionarymonetary policies after September of 2021. What will happento the output, employment and price level in the economy inDecember 2021 (assuming that monetary policies take a fewmonths to show results)? How will you change your graph inresponse (you need to show a shift of some curve)?C. Will you let market adjustment work? Show on the graph howmarket adjustment will affect the economy in May 2022compared to where the economy was in December 2021?

Aggregate demand refers to the total demand of goods and services in an economy in a given period of…

Answered: Question 5 • Consider a baseline long…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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A. Draw the baseline long run steady state equilibrium. Suppose this equilibrium existed in September of 2021

B. Suppose the Federal Reserve undertakes expansionary monetary policies after September of 2021. What will happen to the output, employment and price level in the economy in December 2021 (assuming that monetary policies take a few months to show results) ? How will you change your graph in response (you need to show a shift of some curve)?

C. Will you let market adjustment work? Show on the graph how market adjustment will affect the economy in May 2022 compared to where the economy was in December 2021?

Question 5
Consider a baseline long run steady state equilibrium where
output is 20 trillion dollars, and the price level is 100. Note:
price expectation is the same as the price level at the long
run steady state equilibrium & unemployment is 5% or
lower
A. Draw the baseline long run steady state equilibrium. Suppose
this equilibrium existed in September of 2021
B.
Suppose the Federal Reserve undertakes expansionary
monetary policies after September of 2021. What will happen
to the output, employment and price level in the economy in
December 2021 (assuming that monetary policies take a few
months to show results)? How will you change your graph in
response (you need to show a shift of some curve)?
C. Will you let market adjustment work? Show on the graph how
market adjustment will affect the economy in May 2022
compared to where the economy was in December 2021?

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