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?  Note that= explanation does not mean description please explain

Q: 1. There is a positive aggregate demand shock. Draw what happens to the economy in the short run.…

A: In the short run, a positive aggregate demand shock refers to a sudden increase in overall demand…

Q: Assume initially that the economy is in equilibrium in the long run. Next, suppose investors'…

A: External shocks are events that are unexpected and impact real economic growth.  A fall in the…

Q: 16. If an economy suffers simultaneous negative aggregate demand and aggregate supply shocks, and…

A: Negative aggregate demand shocks decrease the aggregate demand at each price level and shift the…

Q: Based on the given figure, the economy is initially in long-run equilibrium at point A. If there is…

A: Potential output, also referred to as potential GDP or the natural level of output, represents the…

Q: Which of the following statements best describes how the economy will adjust on its own in the long…

A: In case of unemployment there would be a downward pressure on wages => the cost of production of…

Q: 3. Suppose that we observe a fall in expected rate of return. Which graph most accurately shows how…

A: The anticipated gain or loss from an investment by the investor is known as the expected rate of…

Q: Under what circumstances a long-run aggregate supply curve would shift either to the right or left?…

A: Aggregate Supply Curve (ASC): The ASC can be perceived as a graphically drawn curve representing the…

Q: 2. The Phillips curve in the short run and long run In the year 2020, aggregate demand and aggregate…

A: Graph:-

Q: Consider an economy initially in a long-run equilibrium. A positive AS shock will _____ the price…

A: Long run aggregate supply curve is vertical. In  the long run, the actual GDP is equal to potential…

Q: 1. Assume that a country’s economy is in a short-run equilibrium and the actual unemployment rate is…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Suppose an economy is in long run equilibrium. 2.1 use the model of aggregate demand and aggregate…

A: Suppose an economy is in long run equilibrium. 2.1 use the model of aggregate demand and aggregate…

Q: Show that if the economy's aggregate supply curve is vertical, fluctuations in the growth of…

A: This can be defined as a concept that shows the total demand for the products and services in a…

Q: Problem Solving 1. Suppose the Central Bank reduces the money supply by 5 percent. Assume the…

A: Aggregate Demand is the prevailing demand for all the services and goods in the country’s economy…

Q: 3. Suppose that we observe a decrease in wages. Which graph most accurately shows how this would…

A: Wages refer to the remuneration or the amount of money which is received by the workers after they…

Q: Determine whether the scenarios below shift the short-run aggregate supply curve ("AS") or the…

A: Aggregate demand is the sum of Consumption, Investment, government spending and net export.  Any…

Q: A Dynamic Model of Aggregate Demand and Aggregate Supply - End of Chapter Problem The text analyzes…

A: Introduction Temporary demand shock happens in an economy but there is no supply shock happens. a)…

Q: The economy is depicted by the graph to the right. It is presently operating at point A. 160-…

A: please find the answer below.

Q: Question 7 Refer to the figure. In the figure, assume the initial real growth rate of the economy is…

A: The initial growth rate of the economy is 3%. The negative aggregate demand shock leads to shift in…

Q: 6. Differing views of self-correction Economists disagree about how quickly the economy adjusts to…

A: 1. Adaptive   2. point V to B and eventually from point B to point G   3. Directly from V to G…

Q: Question 2: a. Give one example of a demand shock (a change that shifts demand curve) and one…

A: Demand shock: This occurs when there is a sudden and significant change in consumer demand for goods…

Q: 7. Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, and AD1…

A: Aggregate demand refers to the quantity of goods or services that an economy demand in a period of…

Q: Explain why is a period of stagflation (inflation and recession at the same time) is part of the…

A: Stagflation is an economic condition where the inflation rate is high, the economic growth rate…

Q: 5. Assume that the Federal Reserve takes the widely expected policy action at its upcoming meeting…

A: Monetary policy is used to control the money supply in the economy. The money supply is controlled…

Q: Let's say the Aggregate Demand is less than potential output. Our goal is to keep the short run…

A: Option B is correct Increase interest rates and increase taxes

Q: 5. For each of the following, draw an Aggregate Demand- Aggregate Supply diagram with left hand axis…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Suppose that environmental regulations require firms to reduce emissions and pollution during…

A: At first the Aggregate demand and supply curve is as below:- Impact in short run:- At first the…

Q: What is positive supply shock? What are the few examples to positive supply shocks? What is the…

A: A supply shock refers to the changes in aggregate supply in the economy.