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
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?
A nation's economy is in short run equilibrium. The actual unemployment rate is lower than the natural rate of unemployment. A. Show each of the following using a correctly labeled graph of the long run aggregate supply curve, short run aggregate supply curve, and aggregate demand curve: i. Current price level, labeled PL1, and current output level, labeled Y1 ii. The full employment output level, labeled Yf. B. Use a correctly labeled money market graph to show how the country's central bank action can move the economy toward its long run equilibrium. Indicate how this affects the equilibrium nominal interest rate in the short run. inc
QUESTION 4 Chapter 14 Suppose economy is in long run equilibrium. [Only one diagram is required for this question, draw and label clearly to show all relevant points and moves, if more than one diagrams are drawn for this question, I will give a zero grade for this question] a. Use the model of aggregate demand and aggregate supply to illustrate the initial equilibrium (call it point A). Be sure to include both-short run and long-run aggregate supply. b. The central bank raises the money supply by 10%. Use the diagram you drew in part a) to show what happens to output and price level as the economy moves from initial equilibrium A to the new short-run equilibrium (call it point B). Explain all the details about the changes that happen due to increase in money supply and how these changes affect the model. c. Show how economy moves from the short run equilibrium (point B) to the new long- run equilibrium (call it C) and explain why it moves to C. d. According to sticky wage theory of…
Please be sure to explain why and how to the questions -Thank you

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