Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD, to AD₂. As a classical economist from Langoria, you explain that the shift in aggregate demand creates You also explain that will be affected in the short run. You note that such a gap leads to an unemployment rate that is to .As wages change, the explain that in the long run, the natural unemployment rate. This means curve shifts to the will be affected. that wages until Real GDP equals Natural Real GDP. Finally, you are certain

Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD, to AD₂. As a classical economist from Langoria, you explain that the shift in aggregate demand creates You also explain that will be affected in the short run. You note that such a gap leads to an unemployment rate that is to .As wages change, the explain that in the long run, the natural unemployment rate. This means curve shifts to the will be affected. that wages until Real GDP equals Natural Real GDP. Finally, you are certain

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the classical AS-AD model with misperceptions. Assume that the economy is initially at its general equilibrium. Now, suppose the central bank considers an increase in the nominal money supply that is not anticipated by households or firms. b. How does the misperception theory work? c. Which of the three markets discussed in class is first affected (labor, goods, or asset market)? Explain and show graphically how this market is affected by an unanticipated increase in the nominal money supply.
Figure 10.3 P AS2 P2 P1 AD: Y2 Which of the following is not true in Figure 10.3: O The economy is going through a stagflationary period O The cost of crude oil has increased Output is stagnating, while inflation is increasing O Offshore wind farms are delivering cheap energy
1. Imagine an economy, where the SRAS in terms of inflation is given by II=5+Y, where Y is output. Imagine that the long run AS curve is given by Y=2. (25 marks) a) Give the equation of the AD curve (you can take liberties), if we assume that initially, the economy is at its long-run equilibrium. Justify. b) Imagine that your chosen AD curve's intercept goes up by one unit due to an expansionary monetary policy. What will be the new final equilibrium after this change? Justify. c) What will be the equilibrium after two periods of adjustment? Justify. d) Assume that before all the changes in the economy, in the initial, long-run equilibrium, the interest rate was 4 percent. Give an IS and an LM curve that are compatible with this initial equilibrium. Justify. e) What are the IS and LM curves going to be at the very end of the adjustment process, i.e., in the new long run equilibrium? Justify.
In the classical model, equilibrium occurs at full employment, whereas in the Keynesian model, unemployment may exist in equilibrium. O True O False
In a classical economy, citizens begin to expect lower prices five years in the future. As a result, prices and nominal wages fall in the present and remain low, while GDP and real wages fall for a few months but then return to normal. Click the curve that depicts the described event. Price level (P) 110 100 90 Click or tap the appropriate place in the image. LRAS B A C AD₁ AD₁ AD2 Real GDP M (Vie You must Quest'o
Consider the Keynesian sticky wage model. Assume that the economy is operating close to, but not at, its zero lower bound (ZLB). Discuss the following: 1. Could a negative shock to the IS curve make the ZLB bind? Explain and illustrate graph- ically. 2. Could a shock to current productivity z make the ZLB bind? What would need to be the sign of this shock to make the ZLB bind? 3. In the data, in most episodes where the ZLB binds (the US in the wake of the Great Recession, Japan during the 1990s, and the US during the Great Depression), output is low. Given this, would a supply shock as the reason for a binding ZLB make empirical sense? 4. Intuitively, explain why changes in government spending have a bigger effect on output at the ZLB than away from it.
give me answer with details explaintion....
please correct the statement if it false, or if it is true justify why its true. Thank you.....
Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?
1. Imagine an economy, where the SRAS in terms of inflation is given by II=5+Y, where Y is output. Imagine that the long run AS curve is given by Y=2. (25 marks) a) Give the equation of the AD curve (you can take liberties), if we assume that initially, the economy is at its long-run equilibrium. Justify. b) Imagine that your chosen AD curve's intercept goes up by one unit due to an expansionary monetary policy. What will be the new final equilibrium after this change? Justify. c) What will be the equilibrium after two periods of adjustment? Justify. d) Assume that before all the changes in the economy, in the initial, long-run equilibrium, the interest rate was 4 percent. Give an IS and an LM curve that are compatible with this initial equilibrium. Justify. e) What are the IS and LM curves going to be at the very end of the adjustment process, i.e., in the new long run equilibrium? Justify.
Which of the following is incorrect about the Keynesian model shown below? Price Level P₁ AD₁ E₁ Y₁ Real GDP SRAS AD E₁ Yp
Prompt We have been discussing major macroeconomic concepts like the ADAS Model and Fiscal Policy. This is an opportunity to apply that knowledge to a real-world scenario. Choose one of the following scenarios and identify whether it is an example of a recessionary economy or inflationary economy. Next, analyze possible Neoclassical solutions for it. Then, analyze possible Keynesian solutions for it. What would the impact on the economy be in the short-run? Long-run? Scenario 1: An increase in the unemployment rate to 7.4% has occurred. Inflation has increased causing a decline in consumer spending. Exports have declined by more than $4 billion. This has caused a decrease in GDP by 3.7%. Scenario 2: An increase in consumer and government spending has occurred. This has increased GDP by 4.4%. Currently, inflation rate has increased to 1.6%. Unemployment has remained at 5.5%. Scenario 3: An increase in the stock market by 26.5% has occurred. Companies are stockpiling the earnings…