Use the logarithmic model (U=ln(C1)+In(C2))to answer this multiple choice problem. Inthe two-period logarithmic model reviewedin class, the change in the Current Accountcaused by a temporary positive INCOME(endowment) shockis___caused by a permanent positive INCOMEshock.the change(a) smaller than(b) equal to(c) None of the above(d) greater than

In the two-period logarithmic model , the change in the Current Account caused by a temporary…

Answered: Use the logarithmic model…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graph below shows the AD-AS diagram for the US. Suppose that the economy is initially in long-run equilibrium with the price level of 700 (Red AD and SRAS curves). Now suppose that dollar depreciates. Price Level 1200 1100- 1000 900 800 700- 600* 500 400- 300- 200- 100 HITTE 100 200 300 400 500 Real GDP As a result of this event what is the new short-run price level? 600 700 800 900 1000 1100 120 Q
A negative oil price shock: It is common to blame some of the poor macro- economic performance of the 1970s on the rise in oil prices. In the middle of the 1980s, however, oil prices declined sharply. Using the AS/AD framework, explain the macroeconomic consequences of a one-time negative shock to the infation rate, as might occur because of a sharp decline in oil prices.
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We often use the SRAS/AD model to describe which of the following? short run economic fluctuations long run economic trends the effect of changes in the money supply on the interest rate the trade balance
KEYNESIAN OPEN-ECONOMY MODEL IN DYNAMICS This section contains questions about a Keynesian open-economy model: • Recall the static IS equation Y = C +I+ G+ X – M. In this section, we assume that the consumption, the investment and the government expenditure are parameters. The trade balance at year t (X – M) is a linear function of the exchange rate Q; and the income Y; such that: X – Mt = aQt – BY; – YYt-1 where a, B and Y are positive parameters. Derive the difference equation that describes the dynamic behavior of the income Y. | What is correct about the dynamic behavior of the model? Select one or more: Select one or more: The model implies that an increase in the income this year will immediately worsen the net export, keeping other things constant. The model implies that an increase in the real exchange rate will be followed by a series of income rises until a new equilibrium is reached. O It makes sense to assume that 2 < 1. 1+3 The model implies that the immediate multiplier…
For each of the following situations, use the IS-LM-FX model to illustrate the effects of the shock. For each case, state the effect of the shock on the following variables (increase, decrease, no change, or ambiguous): Y, i, E, C, I, and TB. Assume the government allows the exchange rate to float and makes no policy response. a. Foreign output decreases. b. Investors expect a depreciation of the home currency. c. The money supply increases. d. Government spending increases Please illustruate the IS-LM model and explain in detail. I want to understand
Which of the following would initiate a negative AD shock? taxes decrease monetary policy lowers the federal funds interest rate taxes increase household wealth (e.g. equity and/or housing prices) increase
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Consider the intertemporal model with two time periods. Home is a small open economy thatcan borrow and lend in the first period at a fixed world real interest rate of r* = 4%. In thefirst period output is Q0 = 800. Because of a recession, output in the second period output isexpected to fall to Q1 = 500. The country wants to smooth consumption as much as possible.The country begins with no external assets or liabilities. Finally, assume that the intertemporalutility function at home isu(c0) + βu(c1)where β = 1/1+r*u is concave (i.e. consumers are risk averse and want to smooth consumption).(a) Solve for consumption, the current account, and financial account in the first period (t = 0).(b) Solve for the trade balance, current account, and financial account in the second period(t = 1).(c) Would Home be better off or worse off if the world interest rate is 1% instead of 4%?Explain using the appropriate equations.
The Treasury notes that there are several ‘risks’ to its predictions. These include that “ The potential for an extended conflict in the Ukraine ... has increased the risk of supply disruptions, pushing up and increasing volatility in energy, agricultural and metals prices..... A prolonged conflict will increase the risks associated with the negative terms of trade and confidence shocks for these countries” Using the dynamic AD/AS model, illustrate and explain how an extended conflict in the Ukraine would impact on the Australian economy. Be sure to discuss the pathways by which this conflict may impact on the domestic Australian economy. Hint: Start from diagram representing the current position of the economy and then illustrate what happens, consistent with your argument, showing both short run and long run effects. The majority of the marks for this question depend on what you write.
A closed economy is hit by a positive economic shock so that the private sector increases. Show the effects of this in the ISLM model in the short term
With COVID-19, many economies suffered from severe recession. To save their economies, a mix of monetary and fiscal policies was used in 2020. Explain how monetary policy and fiscal policy could be used to stimulate an economy under a recession. State their limitations under the COVID-19.

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Use the logarithmic model (U=In(C1)+In(C2)) to answer this multiple choice problem. In the two-period logarithmic model reviewed in class, the change in the Current Account caused by a temporary positive INCOME (endowment) shock is caused by a permanent positive INCOME shock. the change