Real interestrate, rMPOA remain at point X, remain at point BOB. remain at point X; move to point COC. move to point Z; move to point AOD. move to point Z; move to point CMP,15Y₁0 Output- gap, P(percent deviationfrom potential GOP)Inflation rate, n=11²P₁ P₁=0Outputgap, 9(percent deviationfrom potential GOPSuppose that after a negative supply shock, the economy is at point X in the IS-MP model and at point B on the Phillips curve. If the Fed has a goal of high employment andtherefore does not adjust interest rates, the economy wouldin the IS-MP model andon the Phillips curve.

Phillips Curve describes how inflation depends on output.An IS Curve describes how output depends…

Real interest rate, r MP OA remain at point X; remain at point B OB. remain at point X, move to point C OC. move to point Z; move to point A OD. move to point 2: move to point C MP 15 90 Output gap, P (percent deviation from potential GDP) Inflation rate, m 9₁ 9₁=0 Output gap, 9 (percent deviation from potential GDP) Suppose that after a negative supply shock, the economy is at point X in the IS-MP model and at point 8 on the Phillips curve. If the Fed has a goal of high employment a therefore does not adjust interest rates, the economy would in the IS-MP model and on the Phillips curve.

Real interest rate, r MP OA remain at point X; remain at point B OB. remain at point X, move to point C OC. move to point Z; move to point A OD. move to point 2: move to point C MP 15 90 Output gap, P (percent deviation from potential GDP) Inflation rate, m 9₁ 9₁=0 Output gap, 9 (percent deviation from potential GDP) Suppose that after a negative supply shock, the economy is at point X in the IS-MP model and at point 8 on the Phillips curve. If the Fed has a goal of high employment a therefore does not adjust interest rates, the economy would in the IS-MP model and on the Phillips curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 7 Which of the following are true about the real interest rate, r? There may be more than one answer. a) In the long-run, r is determined by the IS-LM system. b) In the short-run, r is determined by the IS-LM system. c) If expected inflation a rises by 2%, the LM curve implies that r must rise in the long-run. d) If expected inflation r rises by 2%, the LM curve implies that r must decline in the short-run.
Question 6 Which of the following are true about the nominal interest rate, i? There may be more than one answer. a) In the short-run, i is determined by the IS-LM system. b) In the long-run, i is determined by the IS-LM system. c) If expected inflation 7º drops, i must drop in the short-run. d) If expected inflation 7º rises, i must rise in the long-run.
Only D please
If a recession persists due to nominal wage and price stickiness (slow adjustments of nominal wages downward) what kind of monetary policy can bring us out of this recession? contractionary monetary policy neutral monetary policy raising interest rates and decreasing money supply growth
1. For this question assume that inflation is zero. Consider a 2-period economy. Assume that consumer's lifetime utility is given by: U = log c, + 0.9 log c2 Assume that the consumer starts period 1 with the initial wealth of 50,000. The consumer gets labour income y, - T; in period t (t=1,2), where: y1 = 25,000, y2 = 120,000, T, = 5,000, T, = 12,200 and R=0.05 Initially assume that there are no borrowing constraints. a. Write down the Euler equation (with all values substituted) and explain its meaning. Write the intertemporal budget constraint and explain its meaning. b. Solve the consumer's problem of maximizing lifetime utility subject to the intertemporal budget constraint. Is the present value of consumption in the first and the second periods the same? Explain why. c. If for some reason the consumer were to face the borrowing constraint, would it be binding? Explain.. d. Assume that in the economy described in this part, the government decides to build some new roads in period…
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Since an increase in inflation reduces planned spending and short-run equilibrium output: O the aggregate demand curve is downward sloping. O the short-run aggregate supply line is downward sloping. O the aggregate demand curve is horizontal. the aggregate demand curve is upward sloping.
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force O The level of technological knowledge The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL
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1. Use the IS-LM model to analyze the effects of a permanent increase in the nominal money supply. (a) Draw two sets of diagrams, the first describing the short-run effects (before prices have ad- justed) and a second describing the long-run effects (after prices have adjusted). (b) What happens to real money supply in the short-run? And in the long-run?
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