Question 7. Using the models learned in class, graphically illustrate and explain the impact of thefollowing policy and explain your answer.Suppose the Bank of Canada reduces the money supply by 5%.a. What happens to the aggregate demand curves?b. What happens to the level of output and the price level in the short run and in the longrun?c. What happens to the real interested rate in the short run and in the long run?

The economies tend to work upon the basis of the economic, and financial activities they take place.…

Answered: Question 7. Using the models learned in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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9. Which of the following will result in expansionary monetary or fiscal policy being the LEAST effective in increasing real GDP? A. The LRAS curve has a negative slope B. Aggregate demand is less elastic than aggregate supply C. Wages and prices are very flexible and change quickly in reaction to policy changes D. The SRAS curve is perfectly elastic
Question 7. Suppose there is an exogenous increase in the price of oil in an economy. a. Use the aggregate demand and supply model to illustrate and examine the impact of the oil-price increase on output, employment and the price level in both the short run and the long run. b. If the Bank of Canada cares about keeping output and employment at their natural-rate levels, what is the policy response of the Bank of Canada? What is the impact of policy response on the price level? Use the aggregate demand and supply model to explain your answer. Please illustrate the answers using figures with aggregate demand and supply curves. Please also briefly explain the answers in words.
The answer choices for the blanks are Blank 1: fall, remain the same, rise Blank 2: remain the same, rise, decline Blank 3: international trade, real balance, interest-rate
The economy of Carlsberg is presently in equilibrium, but is suffering a recession as depicted in the graph below. The central bank of Carlsberg is introducing an expansionary monetary policy to get the economy back to the full-employment level of real GDP. Price index 160 140 120 100 80 80 7 2 AS AD LAS 60 370 380 390 400 410 420 Real GDP (in billions) a. What increase in aggregate demand is necessary to achieve this? EA $ billions. b. If successful, what will be the growth rate? Round your answer below to 2 decimal places. % c. If successful, what will be the inflation rate? Round your answer below to 2 decimal places. %
Analyse the impact of these events on the price level and total output of an economy in the short term. If policymakers were to use monetary policy to actively stabilize the economy, in which direction should they move the money supply and interest rate and show the effects of these policies? Please discuss your answers with appropriate graphs. - (a) The government raises taxes and reduces expenditures to balance its budget. (b) Enterprises in the economy are pessimistic about the economy in the future. - (c) Foreigners increase their taste for domestically produced beef. (d) The money wage rate rises.
Federal Reserve is the central bank of the United States. She conducts monetary policy with various tools.a. Many central banks share similar policy objectives. What are the objectives of the Federal Reserve? b. Suppose the Federal Reserve announces a “loose” monetary policy.What has to be done, traditionally, with an open market operation? Explain with reference to the money creation process
Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility.Using a graph of aggregate demand and supply EXPLAIN how the credibility of each country’s central bank affect economic outcomes, if both countries are hit with the same a) positive aggregate demand shock? b) negative temporary aggregate supply shock?
How does government or Fed recover the economy in the short run. Please use figures and words to illustrate your explanation.
can you answer this for me
A. Discuss, with the help of diagrams, Friedman’s argument concerning the short and long-run effects of an increase in the money supply. B. Now discuss how his argument can be extended to study short and long-run effects of changes in the growth rate of a growing money supply. Both parts please.
Suppose the Federal Reserve decides to raise its long-run target for the rate of inflation. a. How does the Fed need to change its reaction function in order to do this? b. How will this change affect output in the short run?
i need the answer for that part *Explain the process that leads to the change in the aggregate price level*thank. you

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