Question 5AStarting from a baseline Long Run Steady StateEquilibrium (LRSSE), the federal reserve increases interestrates.i. What kind of policy is this (Monetary or fiscal;ii.iii.expansionary or contractionary? How do you know?As a response which curve will start shifting in whichdirection? Why?How will this policy make the economy move awayfrom the baseline Long Run Steady State Equilibrium(how would it change unemployment or price levelrelative to the long run steady state equilibrium )?iv. Draw a graph to show the changes to the long runsteady state equilibrium (LRSSE).

Step 1:i) This is monetary policy because it involves the Federal Reserve changing the interest…

Answered: Question 5A Starting from a baseline…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 3SCQ: The short run aggregate supply curve was constructed assuming that as the price of outputs...

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Now suppose that droughts in the Southeast and floods in the Midwest substan-tially reduce food production in the United States. Suppose you are an economistworking for the Federal Reserve.d. Use the aggregate demand–aggregate supply model to illustrate graphically the im-pact in the short run and the long run of this adverse supply shock. Be sure to label:i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curvesshift; v. the short-run equilibrium values; and vi. the long-run equilibrium values.State in words what happens to prices and output in the short run and the long run.e. Use the aggregate demand–aggregate supply model to illustrate graphically your pol-icy recommendation to accommodate this adverse supply shock, assuming that yourtop priority is maintaining full employment in the economy.f. Would you recommend the same policy if your top priority was maintaining the pricestability? Why?
In the basic New Keynesian model, suppose that there is an increase in government spending. • First, suppose that the central bank does nothing (accommodates the shock). Illustrate onthe graphs and explain what will be the effects on inflation and output? • Second, suppose that economy initially has inflation equal to the central bank’s inflationtarget and an output gap of zero. What action do you expect the central bank wouldundertake? Illustrate you answer on the graph and explain. PLEASE SHOW ALL HAND WRITTEN STEPS AND WORK!
A9
Please provide a summary of these key points
There is currently a political and academic controversy whether or not stimulus packagesagainst the Covid-induced economic recession will cause inflation. Professor OlivierBlanchard has warned that the stimulus package of the US-administration may lead toinflation in the US. However, he does not see inflation dangers emanating from stimulusprograms in the Eurozone. The Next Generation EU program is not only considered to be a stimulus program but also tobe a growth program, which by spending on infrastructure and climate-related investmentsis expected to lead to an increase in potential output.Analyze in an AD-AS model the impact of economic growth on actual GDP and the pricelevel. Also elaborate on the role that an additional demand stimulus could play.
For each of the three theories for the upward slopeof the short-run aggregate-supply curve, carefullyexplain the following:a. how the economy recovers from a recession andreturns to its long-run equilibrium without anypolicy interventionb. what determines the speed of that recovery
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?
Suppose an economy is in long-run equilibrium.a. Use the model of aggregate demand andaggregate supply to illustrate the initialequilibrium (call it point A). Be sure to includeboth short-run aggregate supply and long-runaggregate supply.b. The central bank raises the money supply by5 percent. Use your diagram to show whathappens to output and the price level as theeconomy moves from the initial equilibrium to thenew short-run equilibrium (call it point B).c. Now show the new long-run equilibrium (call itpoint C). What causes the economy to move frompoint B to point C?d. According to the sticky-wage theory of aggregatesupply, how do nominal wages at point Acompare with nominal wages at point B? How donominal wages at point A compare with nominalwages at point C?e. According to the sticky-wage theory of aggregatesupply, how do real wages at point A comparewith real wages at point B? How do real wages atpoint A compare with real wages at point C?f. Judging by the impact of the money…
Don't use chatgpt, I will 5 upvotes Suppose the aggregate demand curve shifts leftward from ADO. Where does the economy move initially according to the rigid Keynesian view? r:mann PO, Y4 PI, Y2 P3, YO P4, YO
The imaginary country of Harris Island has theaggregate supply and aggregate demand curves as Table24.3 shows. a. Plot the AD/AS diagram. Identify theequilibrium.b. Would you expect unemployment in thiseconomy to be relatively high or low?c. Would you expect concern about inflation in thiseconomy to be relatively high or low?d. Imagine that consumers begin to lose confidenceabout the state of the economy, and so ADbecomes lower by 275 at every price level.Identify the new aggregate equilibrium.e. How will the shift in AD affect the originaloutput, price level, and employment?
09. The left-hand Which of the following statements is tru about the diagrams above depicting the macroeconommy in both Keynesian and Classical frameworks and a change from AEo to AE* and ADo to AD*? a) The left-hand diagrams show the effect of an increase in Aggregare Expenditures (and Aggregate Demand), where the short-run Aggregate Supply is horizontal, meaning a constant products price level. b) The right hand diagrams show the effect of an increase in Aggregate Expenditrues (and Aggregate DEmand), where short-run Aggregate Supply is vertical (constant Aggregate Quantity Supplied). c) The left-hand diagrams illustrate the Keynesian range of the shor-run Aggregate Supply curve, where Keynesian expansionary policy does not cause any inflation and thus is very effective. d) The right-hand diagrams illustrate the Classical or Monetarist range of the short-run Aggregate Supply curve, where Keynesian expansionary policy is totally dissipated in…
Please please answer this asap... What effects do you think monetary policy and fiscal policy has on the day-to-day operations of a business? Should a business owner be concerned with these kinds of macroeconomic issues? If so, why?

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