Answered: What will be the short-run effect of…

What will be the short-run effect of the shift in the reaction function on GDP?Describe briefly how GDP returns to its potential level.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter10: Income And Expenditures Equilibrium

Section: Chapter Questions

Problem 12E

See similar textbooks

Related questions

Q: Describe briefly how GDP returns to its potential level.

A: GDP is at potential level in the long run ie at the intersection of aggregate demand, aggregate…

Q: the short-run effect of the shift in the reaction function on GDP?

A: The reaction-function of the central-bank is the function showing how the central-bank changes the…

Q: Define stagflation?

A: The persistent increase in the price level is known as the inflation. Inflation is worrisome for the…

Q: SUSAN: The professor used the aggregate demand and aggregate supply model to show that in spending…

A: A market is a place where the buyers and sellers interact with each other and the exchange of goods…

Q: If the economy is net importer, what will that do to the aggregate expenditure function and…

A: The change in aggregate expenditure function and the equilibrium level of real GDP when economy is…

Q: This question examines the expenditures approach to calculating GDP. You will use data on different…

A: Gross domestic product(GDP) measures the money value of all final goods and services produced in an…

Q: Which of the following components of aggregate expenditure is most subject to crowding out? O a.…

Q: ⁢42billion, and spending on imports was $35$⁢35 billion. The price level increases, resulting in a…

A: Given : Consumption spending = $150 billion Investment Spending=$40 billion Government spending=$50…

Q: Why must double counting be avoided when measuring GDP? Provide an elaborate answer with at least…

A: Hi, thank you for the question. As per our Honor code, we are allowed to attempt only the first…

Q: Consider the following NIPA Data $4,350 $662 PCE-GOODS EXPORTS-SERVICES $2,659 CHANGES IN PRIVATE…

A: Gross domestic product, or, GDP refers to the value of all the final products that is manufactured…

Q: Based on the data in the table and graph below, identify the equilibrium GDP: Price Level Real…

A: Equilibrium GDP (Gross Domestic Product) is the level of output in an economy where the total…

Q: In the first quarter of 2020, US real GDP declined about 9%, due to the economics shocks from the…

A: Gross Domestic Product(GDP) is the total value of goods and services produced within the borders of…

Q: Discuss which of the following fall into the categories of consumption, investment,government…

A: Hello. Since you have posted multiple parts of the question and not specified which part of the…

Q: ecognize why economists believe that economic problems such as “shocks” and “sticky prices” are…

A: The stability of GDP is one of the primary attributes of economic growth. But, often GDP fluctuates…

Q: Why do the aggregate expenditure function and the aggregate demand curve both shift upward at the…

A: The term aggregate expenditure means the total expenditure incurred by each factor during a…

Q: Differentiate between an induced increase in consumption and in autonomous increase in consumption…

A: Autonomous consumption is the level of consumption without income. On the other hand, Induced…

Q: The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve…

A: The image is unreadable. Kindly upload again.The given graphs are blurry.Reupload the question to…

Q: What is included in U.S. aggregate demand? all spending by households and firms in the United States…

A: The components of aggregate demand include investment spending (I), consumption spending (C),…

Q: Which of the following would be removed from the U.S. aggregate demand measurement? a. Japan's…

A: This can be defined as a concept that shows the total demand for the products and the services in a…

Q: Can we attain equilibrium GDP on the demand side and still have high unemployment?

Q: An article in The Economist magazine noted that 'the economy's potential to supply goods and…

A: The GDP is the shortening utilized for the GDP. The cash worth of the multitude of finished…

Q: Briefly describe what will the US aggregate expenditure be affected (i.e., increase or decrease) by…

A: Aggregate demand is the sum of consumption, investment, government spending and net export. So, AE…

Question

suppose there is a permanent upward shift of the Federal Reserve’s reaction

function.What will be the short-run effect of the shift in the reaction function on GDP?Describe briefly how GDP returns to its potential level.

Definition Video Definition Overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period. Video

Expert Solution

Step 1

The reaction-function of the central-bank is the function showing how the central-bank changes the real-rate-of-interest(r) for a change in the inflation-rate(π). We have describe how a shift in the reaction-function affects the GDP in the short run.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

What will be the short-run effect of the shift in the reaction function on GDP?
Based on The Aggregate Expenditure Model, what affects the level of consumption (five factors); and what affects the level of investment (four factors)?
Explain, in detail, how the adjustment to macroeconomic equilibrium occurs when spending is less than production. Be sure to discuss how inventories play a crucial role in the adjustment process. State what happens to GDP and employment during the adjustment process.
What is the difference between aggregate expenditure and aggregate demand? Why is the aggregate demand curve downward sloping while the aggregate expenditure line is upward sloping?
Write out and explain the GDP and Aggregate Expenditure identity equations.
The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS) for a hypothetical economy. PRICE LEVEL 360 LRAS 300 240 180 120 60 0 0 4 8 12 16 REAL GDP (Trillions of dollars) Suppose the economy is in short-run equilibrium. The consistent with full-employment output. SRAS AD 20 20 24 ? of $4 trillion drives unemployment the unemployment rate Suppose public officials are concerned about the $4 trillion gap in the economy and the resulting higher-than-expected aggregate demand. The government has decided to follow a passive approach to policymaking.
If the economy is net importer, what will that do to the aggregate expenditure function and equilibrium level of real GDP?
Briefly describe what will the US aggregate expenditure be affected (i.e., increase or decrease) by each of the following factors: (1) A decrease in US Government spending (2) An increase in US Consumers' spending (3) A decrease in US Exports (4) An increase in US Imports (5) US dollar appreciates (6) US interest rate becomes higher than other countries
Use the following graph to answer the next question. Price Level AS3 AS₁ 0 Real Domestic Output, GDP Which of the following factors will shift AS₁ to AS2? AS₂ A) A decrease in business subsidies B) An increase in input prices OC) A decrease in business taxes D) An increase in real interest rates
Answer the following questions, which relate to the aggregate expenditures model: Instructions: Enter your answer as a whole number. a. If Ca is $130, lg is $60, X, is -$10, and G is $40, what is the economy's equilibrium GDP? $ b. If real GDP in an economy is currently $250, Ca is $130, l is $60, Xn is –$10, and G is $40, will the economy's real GDP rise, fall, or stay the same? |(Click to select) c. Suppose that full-employment (and full-capacity) output in an economy is $250. If Ca is $180, Ig is $60, Xn is -$10, and Gis $40, what will be the macroeconomic result? O There will be an inflationary expenditure gap and employment levels will be above the full-employment level. O There will be an inflationary expenditure gap and employment levels will be below the full-employment level.
Please Show EVERY Working VERY Clearly!