What, precisely, are the two shocks? (For the purpose of this question,let’s ignore the signifcant role played by the fnancial crisis itself.)
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What, precisely, are the two shocks? (For the purpose of this question,
let’s ignore the signifcant role played by the fnancial crisis itself.)
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- Case : Dealing with Asymmetric Shocks in the EurozoneMember countries of the Eurozone are currently hit by the Covid-19 pandemic, though somecountries are hit harder than others as can be seen from the recent projections of the IMF,here shown for Germany and Italy as an example, in the figure below. Question 1 Explain what is meant by an asymmetric shock and discuss the role of monetary, fiscal andincome policies could play to deal with such a shock for a Eurozone member country.Why do we impose ceteris paribus on a market when analyzing shocks? A. "Nothing else is changing in a market, so it is a realistic assumption." B. Ceteris Paribus allows analysts the ability to isolate effects from specific market shocks. C. "Market shocks occur one at a time, the assumption allows for sequential analysis." D. All of the answers are correct.Using the ASAD graph and starting in long run equilibrium YA = Y* (see the model example in the textbook Figure 13.11) take each of following shocks one by one in separate graphs and decide if the event falls into the real shock (LRAS) category or aggregate demand (AD) shock category. Then graph each. Remember that “shocks” include both good and bad events and the graph should show that in the short run the economy is either that YA < Y* or YA > Y* A fall in the input price of oil A rise in consumer optimism A cut in business taxes if they buy new equipment Foreigners buy fewer US made goods. Consumer Fear New inventions (A) occur at a faster pace than usual A faster money growth rate A permanent cut in income taxes
- 3. Is the above model consistent with the policy ineffectiveness proposition? How does the policy implication of the model differ from that of the traditional static AD-AS model with exogenous expectations or adaptive expectations? Explain.11. Applying the AD-AS model Aa Aa Financial crises, such as the one that impacted many developed countries starting in 2007, decrease banks' ability and willingness to make loans. Decreased availability of credit decreases businesses' ability to make investment purchases and consumers' ability to buy goods and services. As a result, a financial crisis is a negative shock for an economy. The following graph shows an economy's aggregate demand curve and its short-run and long-run aggregate supply curves after a financial crisis has pushed it into recession. Suppose that the government decides not to use stabilization policy and allows the economy to adjust on its own. Determine which curve, the aggregate demand curve or the short-run aggregate supply curve, shifts when the economy adjusts in the long run. Use either the purple line (triangle symbols) to plot a new aggregate demand curve or the tan line (dash symbols) to plot a new short-run aggregate supply curve, to show the economy in…Please give exact answer of question with explanation of correct option and incorrect option and take like
- An economy has: R = 10 +.ly, C= 14 + 9YD, G= 25, I = 75 -r, NX = 30 -.06y - .5p, MD = 25y-r, MS = 15 and ASo = 2p. A negative AS shock occurs: AS, = 2p – 60. a. Provide a diagram showing AS/AD to illustrate how real GDP and the price level are affected by this AS shock. A government can offset this AS shock by increasing the money supply OR increasing government spending. They won't do both. Calculate level of money supply MS= b. and the level of government spending G = that would be necessary to offset this AS shock.Please fast solve the problemConsider a modified aggregate supply function which takes account for the emergence of random business cycle shocks (ce) with Ele] - O in the sense that The loss function is the same as in exercise 1: L- (n - k)* +(m) Notation: €: random shock; E[e,]: expected value of e; b: constant parameter, all other variables see Exercise 1. Having considered the scenario above complete the following tasks: a) Derive the central bank's preferred inflation rate and explain. b) The result in a) reads as T = b(k – j) – %3D Explain the economic intuition of this result. c) Consider a more conservative central banker whose loss function is represented by L = }(y – k)? + }(7.) k) + (m) Apparently, the preferred inflation rate would read eb 1+b TE = 6(k – y) – What can you say about the relationship between B and b? le i larger or smaller than b? Provide an explanation.
- ון רבSuip Reset the graph and click on the blue square to apply a negative supply shock the the economy. Then adjust the movable point to view the effects of potential policy responses to the negative supply shock. Use what you observe to answer the questions that follow. a. In response to the effects of a negative supply shock, policymakers decide to decrease aggregate demand. What are the effects of this choice? O an increase in aggregate output, and an increase in the aggregate price level an decrease in aggregate output, and an decrease in the aggregate price level an increase in aggregate output, and an decrease in the aggregate price level an decrease in aggregate output, and an increase in the aggregate price level b. What are the overall tradeoffs with regard to this choice? Policymakers have chosen to fight inflation by increasing AD, but this further reduces aggregate output and makes the recession worse. Policymakers have chosen to fight inflation by decreasing AD, but this…please explain this dynamic multiplier graph that givenLooking 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.
