There is a temporary demand shock Ep = -0.05. In the short run, immediately following this shock, output and inflation are given by: OY=0.975, π = +0.005 Y = 0.975, π = -0.005 OY 1.025, T = +0.005 OY 1.025, π = -0.005
Q: 42. Why is the MR<P for a pure monopoly (except at the first unit sold)? 43. Area "A" (diagonally…
A: The monopoly seller is only seller in the market. The monopoly seller is the price maker. There are…
Q: Table 2: Market for Skis P 0 4 8 12 16 Qd 15 12 9 6 3 20 0 Qs 0 6 12 12 16 20 2. Consider Table 2.…
A: This question involves analyzing a market for skis using Table 2, which shows the quantity demanded…
Q: If the money supply in Mexico is increasing much more rapidly than the money supply in the United…
A: Economics refers to the study of the scarcity of resources and its implications for the use of…
Q: Some economist argued that globalization and international trade affect the domestic producers in a…
A: The term "globalization" describes how economies, civilizations, and cultures are intertwined and…
Q: The price of crude oil increased to its highest level due to conditions which impacted supply.…
A: OPEC (Organization of the Petroleum Exporting Countries) is an international organization that was…
Q: Price Elasticity of Demand (Ed) Ignore the MINUS sign in the coefficient for Price Ed 1. When…
A: Since you have asked multiple question, we will solve first question for you. If you need any…
Q: What is the benefit of a close economy. Explain in detail.
A: A closed economy is an economic system that has no trade, investment, or money flow interactions…
Q: Suppose a monopoly produces commercial cameras and film. Pictures require film and one camera. Two…
A: To maximize profit, the monopoly will want to set a price that equates marginal cost with marginal…
Q: There are N>=2 collectors who engage in the auction of an antique. The collectors have a common…
A: According to the notion of a Nash Equilibrium in game theory, each player in a game is acting in the…
Q: 4. What would be the effect on the aggregate demand curve of an increase in U.S. autonomous net…
A: The net exports of the economy are the value of exports get after excluding the level of imports…
Q: Imagine that is the quantity of Blood Angel marine models. Ann wants to get into table top war…
A: The utility function refers to all those commodity bundles that derive the same amount of utility…
Q: A sales tax levied at the rate $T does not have the same effects on the market's equilibrium as does…
A: A tax is a mandatory financial levy that the government imposes on people, companies, or other…
Q: Suppose that the parents of a young child decide to make annual deposits into a savings account,…
A: Given: Annual withdrawals from 18th year to 22nd year (i.e. 5 years) = Php119167 Interest rate = 8%…
Q: Bank Balance Sheet Assets 200 Liabilities 180 Capital 20 If the bank's assets decline in value, its…
A: The banking industry is integral to the modern economy. Banks take money that consumers deposit and…
Q: How long would it take for the price level to double if inflation persisted at the following…
A: Inflation refers to the rise in the prices of goods and services in an economy over time. It reduces…
Q: When the aggregate price level _____, firms in perfectly competitive markets usually experience a(n)…
A: A perfectly competitive firm is a price taker, which means the price is determined by the market…
Q: An incumbent firm has a cost function C = 100 + 1.5 q2 , so its MC = 3 q. An upstart firm has…
A: The Areeda-Turner rule is used to determine if a dominant firm's pricing strategy is…
Q: Supermarkets, and grocery stores Assume the Government chose to set a price control on the…
A: Price control is a form of government legislation that mandates the prices of goods and services in…
Q: Suppose the government imposes a tax of 20% on automobile production for cars that use fossil fuels,…
A: The tax has the effect of shifting the quantity towards a position where the difference between the…
Q: Question 4. (1) As discussed, the IS-LM model can explain the impact of fiscal policy to aggregate…
A: Nominal value in economics is measured in terms of money, whereas real value is assessed in…
Q: 7. Consider the money market. Suppose the U.S. economy begins to boom and aggregate output…
A: A money market can be termed as any financial institute or dealer that deals in the borrowing of…
Q: A small town has 300 people, all of whom are interested only in private consumption and in the…
A: Utility function : U(X, G) = X + AG - BG2 There are three types of people with different values of…
Q: An economy produces three goods: A, B and C. Quantities (Q) and prices (P) per unit for years 2010,…
A: According to the given, An economy produces three goods : A, B, and C Quantities and prices are…
Q: Market constraint Hourly wage of workers in the industry The number of other firms selling similar…
A: A constraint restricts or prohibits the success of a particular production procedure. According to…
Q: Specify the strategies for P1 and P2, respectively. Eliminate all strictly dominated strategies, and…
A: E F G H A 10,30 0,50 5,5 40,20 B 40,10 10,10 8,20 30,5 C 15,5 10,30 5,20 25,20 D 20,3 20,8…
Q: If there were 10 firms in this market, the short-run equilibrium price of rhenium would be $___ per…
A: Profit maximizing level of output for a competitive firm is at the level of output where price (P)…
Q: a. What are the short-run equilibrium real GDP and price level in 2019? b. What is the long-run…
A: Aggregate demand refers to the total demand for commodities and services made by all the economic…
Q: The key determinant of an Optimal Currency Area is likely to be: O the econonomic stability loss O…
A: An OCA is a geographic region in which it is economically efficient to use a single currency rather…
Q: Although the unemployment rate is not a perfect measure (failing to account for potential increases…
A: Government-sponsored financial aid is known as unemployment benefits and is given to those who have…
Q: Nu Things, Inc., is considering an investment in a business venture with the following anticipated…
A: The amount of money that flows in any business through the incoming and outgoing process is…
Q: QUESTION TWO In the European Union, the EU commission recently approved a Euro 3.0 trillion…
A: IS-LM-BOP model is also known as The Mundell-Fleming Model. It is developed by Robert Mundell and…
Q: 2a. A material handling system (MHS) costs $100,000 to install. The salvage value (SV) of the MHS…
A: The first cost of MHS (FC)= $100,000 The salvage value in year 0 is equal to the first cost and…
Q: Suppose that Russia and Australia (the two biggest producers of diamonds) make an agreement to both…
A: The diamond industry is one of the most lucrative industries in the world, and it is dominated by a…
Q: Q3. When the economy is at full capacity: A. The economy is at less than full potential employment,…
A: Full capacity output refers to the maximum amount of goods or services that a company or a…
Q: 4. Using the rule of 70 Suppose some hypothetical economy has experienced an annual growth rate of…
A: The annual growth rate is commonly used in business and economics to track the performance of a…
Q: occurs when a company exports to a foreign market at a price that is either lower than the domestic…
A: International trade refers to the exchange of goods and services across national borders.…
Q: Market demand is given by P = 28 - ½ Q. There is a single incumbent firm with constant MC = AC = 5,…
A: A market is any place where 2 or more parties can meet to involve in an economic transaction—even…
Q: Periodic Inventory Using FIFO, LIFO, and Weighted Average Cost Methods The units of an item…
A: The methods used to value a company's inventory include specific identification, first-in, first-out…
Q: In contrast to revolving credit, installment credit loans allow a borrower to do which of the…
A: A credit loan is a type of loan granted to an individual or a business with the understanding that…
Q: Numerical Analysis 4. Find the equilibrium output for the following economy C = 120 +0.5(YT); 400; P…
A: IS curve is the curve made by joining all the points of goods market equilibrium. LM curve is the…
Q: Switching to powder coating technology will reduce the emission of volatile organic carbons (VOCs)…
A: The rate of return produced by a project when the Net Present Value is zero is known as the Internal…
Q: Suppose inverse demand is given by the following: P = 40 - 0.5Q There are two firms each with the…
A: Inverse demand is given as P=40-0.5Q=40-0.5(q1+q2)where q1 is the output of firm 1 and q2 is the…
Q: 6. Suppose y = f(x) is a production function determining output y as a function of the vector x of…
A: To prove the part (b), we have to know about the property of concave function that If f is concave…
Q: Pick 1 answer for each. 3. When the economy is at full capacity: A) The economy is at less than full…
A: Full employment is the situation where economy uses its given resources and technology at its best…
Q: Sam bought a rental property for 500,000 five years ago. He sold the property this year for…
A: Sam bought a rental property for $500,000 five years ago. He sold the property this year for…
Q: Answer the following questions. a) If the current budget shows a deficit, what would an increase…
A: Contractionary fiscal policy is a policy used by governments to decrease aggregate demand in an…
Q: You own a small engineering consulting company. If you invest $200,000 of the company’s money in a…
A: Present value is the value of investment in today's dollar. Future value is the value of investment…
Q: Using the demand and supply of loanable funds, demonstrate the effect of the following on the…
A: Economic growth promotes increased profitability for firms, enabling more spending on research and…
Q: monetary policy rule and monetary policy discretio
A: In order to accomplish its policy goals, such as stable prices, high employment, and sustained…
Q: Exercise 2 Suppose you have the following hypothetical demand or sales functie Qx=…
A: Demand function can be described as a relationship between quantity demanded and its determinants…
Step by step
Solved in 3 steps with 1 images
- Consider an AD-AS model with AD curve Y – Y* = - αγ (π - π*) + εand AS curve π = π + φβ(Y – Y*) + εwith parameter values α = 0.5, γ = 1, φ = 1, β = 0.5,and with inflation target π* = 0.02 and potential output normalised to Y* = 1.Starting from a long-run equilibrium with π = π* suppose there is a temporary demand shock ε = -0.05. Which of the following is TRUE? 1.In the short run, output is 5% below trend 2.In the short run, output is 4% below trend 3.In the short run, inflation is 1% 4.In the long run, output is 5% below trendConsider an AD-AS model with AD curve Y - Y* = −αy(n − ñ*) + € and AS curve π = π² + ¢ß(Y – Y*) + €s with parameter values a = 2, y = 1, p = 1 and ß = 2 and with inflation target * = : 0.01 and potential output normalised to Y* : = 1. e T Starting from a long-run equilibrium with ² = *, suppose there is a temporary supply shock €s = 0.05. Which of the following is FALSE? In the short run, inflation is 1% above target In the short run, output is 2% below potential In the short run, the real interest rate rises O In the short run, the real interest rate fallsConsider the short-term model characterized by the following AS and AD curves: Ý, = à – bm(x, – ñ) (AD] and A; = x; + vỶ, + õ, (AS). The economy is in steady state at time t = -1 (that is, a-1 = ñ, ō-1 = 0, and ā = 0). It is hit by a one-time inflation shock öy = .025 at time i = 0. For now, expectations are adaptive: 7 = ,-1. You'll use the answer to this question in several follow-up questions. To keep track of your results, you should use a spreadsheet application. If you don't already have one, you can use this hyperlinked template e (it's a Google Sheet). Calculate zo assuming b = 0.5, m = 2, ñ = 0.03, and ū = 1. Enter your answer as a percentage and round to the nearest hundredth.
- Consider the ASIAD model. The AS curve is: Y, = a - bm(n, - 7) and the AD curve is: T, = T;-1 + TỸ, +ō. where a is inflation and Y is short-run output. The subscript t indexes time. T = 0.01, 0 = 0.02, ā = 0.04, b = 0.05, and m = 0.04 are fixed strictly positive parameters. Assume the inflation target n is 0.02 (or 2%). Imagine the Bank of England decides to increase its inflation target to 0.04 (or 4%) What happens to short-run output Ỹ in the period immediately after the shock? a. increases O b. decreases Oc. stays the sameA Central Bank is said to have a more hawkish stance when it reacts more aggressively against deviations of inflation from target. Recall that the AD curve is given by: Ýį = ā – bm(T; – ñ), and the AS curve is given by Tt = Tt-1 + ū¥Ýt +ō Knowing this, saying that the Central Bank became more hawkish is equivalent to say: Inflation, AS AD Output, Ỹ O That ā decreased, thus moving down the AD curve. O That b decreased, thus making the AD curve steeper. That ū increased, thus making the AS curve steeper. O That ñ decreased, thus flattening the AD curve. O That the equilibrium inflation moved to below ĩñ. That b decreased, thus making the AD curve flatter. O That ā increased, thus moving up the AD curve. O That ñ increased, thus flattening the AD curve.- Consider an AD-AS model with AD curve Y - Y* = -αy(π − π*) + €D and AS curve π = π² + ¢ß(Y−Y*) + es with parameter values a = 2, y = 1,6 = 1, ß = 2, and with inflation target * = 0.01 and potential output normalised to Y* = 1. Starting from a long-run equilibrium with ² = π*, = π*, suppose there is a temporary supply shock es = 0.05 and a temporary demand shock ED = 0.05. Which of the following is TRUE? In the short run, inflation is 1% above target O In the short run, output is 2% below potential O In the short run, the real interest rate rises O In the short run, the real interest rate falls
- Consider the AS/AD model. The AS curve is: Y, = a – bm(r, - 7) and the AD curve is: Thy = T-1 + DỸ, +ō. where r is inflation and Y is short-run output. The subscript t indexes time. ī = 0.01,0 = 0.02, ā = 0.04, b = 0.05, and m = 0.04 are fixed strictly positive parameters. Assume the inflation target is 0.02 (or 2%). Calculate Y at the steady state. (If you answer is 3%, do not put the percentage sign enter 3 or 0.03).Q1 [Inflation in a monetary OLG model] Consider an overlapping generations model in which individuals live for two periods, young and old. The economy begins in period 1, when there are NO numbers of the initial old. In each period t 2 1, Nt young individuals are born, where Nt = nNt-1 and n>1. There is only one good in this economy. The good cannot be stored from one period to the next. In each period, each young individual is endowed with y units of the consumption good and old individuals have zero endowment. The young generations' preference can be expressed use the following utility function: u(c1,t, c2,t+1) = log(c1,t) + B log(c2,t+1) Members of the initial old generation only live for one period and have utility u(co,1) = logc0,1. In this economy, individuals can use fiat money to facilitate trades between different generations. Assume the stock of fiat money M grows at a constant rate y, i.e., Mt = yMt-1, where y >1. The money created each period is used to finance a lump- sum…Consider the AS/AD model. The AS curve is: Ỹ, = a – bm(r, – T) and the AD curve is: T; = T;-1 + UY, +ō. t where t is inflation and Y is short-run output. The subscript t indexes time. ū = 0.01, ō = 0.02, ā = 0.04, b = 0.05, and m = 0.04 are fixed strictly positive parameters. Assume the inflation target T is 0.02 (or 2%). Calculate T at the steady state. (If you answer is 3%, do not put the percentage sign enter 3 or 0.03).
- Determine the impact of the each of following types of shocks on output and inflation in the short-run and long-run. (Use AS-AD-LRAS curves to illustrate your reasoning). A decline in consumer confidence. An increase in inflation expectations. An increase in export demand.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. a. How does the misperception theory work? b. Which of the three markets 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. c. Use the classical version of the AS-AD model with misperceptions to explain and to show graphically how an unanticipated increase in the nominal money supply affects the short-run equilibrium. d. Use the classical version of the AS-AD model with misperceptions to explain and to show graphically how an unanticipated increase in the nominal money supply affects the long-run (general) equilibrium.During July 2020, Japan’s u was 2.6%; economists have estimated that Japan’s un is 2.5%. If Japan has an accelerationist PC, what would have happened to Japan’s inflation rate during July? Explain fully by showing where Japan was functioning using the appropriate graph. Make all your assumptions clear; calculations not required.