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![As the economy begins to worsen Claudia
Sahm (formerly director of macroeconomic
policy at the Washington Center for Equitable
Growth) proposes a new policy that provides
American's with an automatic lump-sum
stimulus payment when the three-month
average national unemployment rate rises by
at least .5 % compared to its low in the last
year.
What kind of policy is this? Discuss the effects
of this policy proposal if it was in place as the
changes in (a) took place.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9ce09f48-05b1-4b65-83ef-5ea4c50d01e4%2F7109d39f-c87d-442a-949c-4d3fb62106d6%2Fq665cx_processed.jpeg&w=3840&q=75)
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- Assume that an economy operates according to the sticky-wage model. The nominal wagewas set to make labor supply and labor demand equal when the expected price levelequaled 120 (as measured by the consumer price index).a. Use a graph of the labor market to illustrate what happens to the quantity oflabor employed if the actual price level over the time period when wages arestuck equals 110.b. Use a graph of the production function to illustrate how the quantity of outputproduced changes if the actual price level equals 110 when the expected pricelevel is 120.c. Given the unexpectedly low price level, will this economy be operating above,below, or at the natural rate?The long run macroeconomic performance of an economy can be reflectedfrom the changes of her major macroeconomic indicators. With appropriateinterpretations of the changes to these indicators, one can identify the inherentstructural features of an economy, and hence, identify her strengths andweaknesses. In about 250 words, write a short essay on ONE economy from the list below:i. Singapore;ii. The United Kingdom;iii. The United States.In your essay, describe the changes of major macroeconomic indicators fromthe last decade. Using them to illustrate major structural features of the choseneconomy. Based on the above, identify ONE inherent problem implied bythese structural features that might limit her macroeconomic performance inthe long run. Suggest ONE practical government policy in dealing with thisinherent problem.There is currently a political and academic controversy whether or not stimulus packagesagainst the Covid-induced economic recession will cause inflation. Professor OlivierBlanchard has warned that the stimulus package of the US-administration may lead toinflation in the US. However, he does not see inflation dangers emanating from stimulusprograms in the Eurozone. The Next Generation EU program is not only considered to be a stimulus program but also tobe a growth program, which by spending on infrastructure and climate-related investmentsis expected to lead to an increase in potential output.Analyze in an AD-AS model the impact of economic growth on actual GDP and the pricelevel. Also elaborate on the role that an additional demand stimulus could play.
- To determineThe impact of increased production without increased inflation.Assume that a Cob-Dougls production functionis a god representaion of the economy, the substitution efecti stronger than the income efect an tht the economy was intaly at quirum. Suppose that Congress pases alaw that requires al orersto retre at g 72, nstead of 6. Hthe wage is fexble, what il happent uirium outpu? The equilbrium output level wi ncrease OThe euirium outut eve wil derese ( The equilibrium output level will emain constant Not enough information i gven to detemine the answerConsider a one-period economy which experiences the destruction of some of the nation’s capital stock (say through a hurricane is de- stroyed). How should this effect equilibrium, consumption, output and labor supply? Now, let’s say the government tries to offset some of the declines in capital on output and hours worked by increasing govern- ment spending. What is the likely outcome of this policy intervention in terms of consumption? In our model, the affects of changes on wages are ambiguous because the income and substitution effects move in opposite directions. How do (many) macroeconomists deal with this ambiguity in terms of study- ing business cycle? How do economists resolve this ambiguity when studying long term economic development? Consider an economy with a straight line PPF. Show how an increase in government spending paid for by an increase in lump sum labor taxes affects outcomes. Do the same for an increase in government spending financed by a proportional income…
- Explain, using the AD‐AS model, how the South African Government can usefiscal policy as a tool to recover from the negative effects of this COVID‐19pandemic. Your answer must include the following:An explanation of how the implementation of this tool will work their waythrough the economy to achieve the desired effect;In August 2008, Mexican pesos were trading at$0.10 on the foreign exchange market. By Novem-ber, they were down to $0.07, a decline of 30%. Explain the fall in the price of a peso using supplyanddemandcurves. Inwords, explain the equiva-lent rise in the price of a dollar.You are hired by the Council of Economic Advisors (CEA) as an economic consultant.The chairperson of the CEA tells you that she believes the current unemployment rate istoo high. The unemployment rate can be reduced if aggregate output increases. She wantsto know what policy to pursue to increase aggregate output by 300 billion TL. The bestestimate she has for the MPC is 0.8. Which of the following policies should yourecommend?a) Increase government purchases by 75 billion TL.b) Reduce taxes by 75 billion TL.c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL.d) Reduce the budget deficit by 300 billion TL
- Looking ahead, policymakers aiming to rekindle their economies will have fewer resources at their disposal and will likelyface some difficult choices. Indeed, without significant additional assistance, many will struggle to simply maintainmacroeconomic stability while meeting the basic needs of their populations. As part of restarting the economies, discusshow monetary policy was critical in reducing the impact of the pandemic within the SSA and globally, post the Covid-19fallout.Congratulationst You have been appointed an economic policy adviser to the United States, You are told that the economy is significantly abowe futtemplyoment GDP. Based on this inlormation, how can the economy would adjust to reach LR.SR Equilbrium (Classical View)? The economy wilt experience low unemployment rate, pushing wages up, and increasing the pelces of a key input (labor). shatting the sAS to the left (up). The economy will experience high unemployment rate, pushing wages down, and reducing the prices of a key input (labor). shiting the SAS to the right (down). The econoriny wil experience low unemployment rate, decreasing inceme, which will eventually shift the AD to the left. The eooncmy will experience low unemployment rate, pushing wages up, and increasing the prices of a key input (labor), shiting the sAs to the night (down).If an economy’s self-correcting mechanism worksslowly, should the government necessarily pursuean activist policy to eliminate unemployment? Why orwhy not?
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