Starting at E₁ suppose the Fed uses expansionary monetary policy then LRAS Aggregate price level, P P₁ P₂ P₁ ..... E₁ E₂ AD₁ Yo Y₁ SRAS₂ AD₂ SRAS₁ Real GDP O AD₁ will shift to AD2 and the economy will move from E₁ to E2. O SRAS₁ will shift to SRAS2 and the economy will move from E₂ to E3. SRAS₂ will shift to SRAS₁ and the economy will move from E3 to E2. AD₂ will shift to AD₁ and the economy will move from E₂ to E₁.

Starting at E₁ suppose the Fed uses expansionary monetary policy then LRAS Aggregate price level, P P₁ P₂ P₁ ..... E₁ E₂ AD₁ Yo Y₁ SRAS₂ AD₂ SRAS₁ Real GDP O AD₁ will shift to AD2 and the economy will move from E₁ to E2. O SRAS₁ will shift to SRAS2 and the economy will move from E₂ to E3. SRAS₂ will shift to SRAS₁ and the economy will move from E3 to E2. AD₂ will shift to AD₁ and the economy will move from E₂ to E₁.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When would it be most appropriate for the Fed to increase the money supply: during a recession or when the economy is expanding? Why?
4. Consider the money market model with the interest rate and the AD-AS model. In cases below, choose correct change in the interst rate and correct shift of the AD curve. 4.a. Central bank increased the money supply. Change in interest rate: Decrease or Increase Shift of AD: Leftward or Rightward 4.b. Central bank decreased the money supply. Change in interest rate: Decrease or Increase Shift of AD: Leftward or Rightward 5. Suppose that the economy fell into a recession. Which is the usual policy the central bank uses to stabilize the economy: Contractionary monetary policy or Expansionary monetary policy?
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Question 3 When placed in the AD/AS framework, the simple quantity theory of money requires O A horizontal AD curve. O A vertical AS curve. O A horizontal AS curve. O A vertical AD curve. Question 4 If decline in interest rates doesn't lead to increased investment then, O Unemployment will be the same. Real GDP will be the same as before. O Allof the above O AD curve will remain unchanged.
plz answer correct explain asap Dont answer by pen pepar
LEAS Od A-D-B SRAS, SEAS MAS Red GDP Refer to Exhibit 14-1. What sequence of points shows the short- and long-run consequences of a rise in velocity under monetarist assumptions? Ⓒ&A-E-B Ob.B-A OCB-D-A
QUESTION 25 Refer to the information provided in Figure 32.3 below to answer the question(s) that follow. AS (long run) Price level Yo Output Figure 32.3 B AS₂ AS₁ moves the economy to Point C. O moves the economy to Point D AD₂ AD₁ 4 Refer to Figure 32.3. Suppose the economy is at Point A. According to the rational expectation theory, an unanticipated increase in money suppl Oleaves the economy at Point A. O moves the economy to Point B.
If economists say that monetary policies cannot affect GDP in the long run, what do they mean? O a. Monetary policy will change potential output and inflation by equal amounts O b. Only fiscal policies can affect potential output O C. Workers and firms have money illusion O d. Workers and firms have no money illusion
Exhibit: Monetary Policy and Rational Expectations Price level Pa Pb Pe Pa LRAS 70 AQUDUN CEEKER VANDIERA C a AS b AD₁ YcY₁ Yb ASI AD2 Real GDP per year ม (Exhibit: Monetary Policy and Rational Expectations) Suppose the economy is operating at point a. Some people observe that an expansionary monetary policy will increase the money supply and ultimately drive the price level to the equilibrium at: a. b. They rationally adjust their behavior and the aggregate demand curve shifts to the left and b becomes the new equilibrium point. O b. c. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point. O c.d. They rationally adjust their behavior and the aggregate demand curve shifts to the left and d becomes the new equilibrium point. O d.d. They rationally adjust their behavior and the short-run aggregate supply curve shifts to the left and d becomes the new equilibrium point. Save Answer
ון רבSuip Reset the graph and click on the blue square to apply a negative supply shock the the economy. Then adjust the movable point to view the effects of potential policy responses to the negative supply shock. Use what you observe to answer the questions that follow. a. In response to the effects of a negative supply shock, policymakers decide to decrease aggregate demand. What are the effects of this choice? O an increase in aggregate output, and an increase in the aggregate price level an decrease in aggregate output, and an decrease in the aggregate price level an increase in aggregate output, and an decrease in the aggregate price level an decrease in aggregate output, and an increase in the aggregate price level b. What are the overall tradeoffs with regard to this choice? Policymakers have chosen to fight inflation by increasing AD, but this further reduces aggregate output and makes the recession worse. Policymakers have chosen to fight inflation by decreasing AD, but this…