You are examining whether a recession was driven by a negative aggregate supply or negative aggregate demand shock. You will conclude that the recession is driven by a negative supply shock if Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a prices fall b the Federal Reserve reacts by decreasing the money supply more people lose their jobs than expected d prices rise

You are examining whether a recession was driven by a negative aggregate supply or negative aggregate demand shock. You will conclude that the recession is driven by a negative supply shock if Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a prices fall b the Federal Reserve reacts by decreasing the money supply more people lose their jobs than expected d prices rise

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 5PA

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Suppose two countries have identical aggregate demandcurves and potential levels of output, and g is the samein both countries. Assume that in 2019, both countriesare hit with the same negative supply shock. Given thetable of values below for inflation in each country, whatcan you say, if anything, about the credibility of eachcountry’s central bank? Explain your answer.Country A Country B2018 3.0% 3.0%2019 3.8% 5.5%2020 3.5% 5.0%2021 3.2% 4.3%2022 3.0% 3.8%
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…
Money demand is likely to increase the most during which part of the business cycle? A. recession B. trough Ос. рeak O D. contraction O E. recovery
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explain the likely effects of U.S boom on the demand for canadian exports.what woukd be the effect of canadian aggregate demand?suppose the bank of canada viewed its monetary policy as being appropriate for keeping gdp of canada close to potential gdp . what would you hen predict to be the central bank's response to foriegn boom in U.S
Now suppose that droughts in the Southeast and floods in the Midwest substan-tially reduce food production in the United States. Suppose you are an economistworking for the Federal Reserve.d. Use the aggregate demand–aggregate supply model to illustrate graphically the im-pact in the short run and the long run of this adverse supply shock. Be sure to label:i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curvesshift; v. the short-run equilibrium values; and vi. the long-run equilibrium values.State in words what happens to prices and output in the short run and the long run.e. Use the aggregate demand–aggregate supply model to illustrate graphically your pol-icy recommendation to accommodate this adverse supply shock, assuming that yourtop priority is maintaining full employment in the economy.f. Would you recommend the same policy if your top priority was maintaining the pricestability? Why?
Suppose that survey measures of consumer confidence indicate a wave of pessimism is sweepingthe Pakistan economy. If policymakers do nothing, what will happen to aggregate demand? Whatshould the State Bank do if it wants to stabilize aggregate demand?
Suppose the economy is in a long-run equilibrium.a. Draw a diagram to illustrate the state of theeconomy. Be sure to show aggregate demand,short-run aggregate supply, and long-runaggregate supply.b. Now suppose that a stock market crash causesaggregate demand to fall. Use your diagramto show what happens to output and the pricelevel in the short run. What happens to theunemployment rate?c. Use the sticky-wage theory of aggregate supplyto explain what happens to output and the pricelevel in the long run (assuming no change inpolicy). What role does the expected price levelplay in this adjustment? Be sure to illustrate youranalysis in a graph.
Illustrate and interpretthe short-run and longrun effects of temporary and permanentsupply shocks
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…
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In general, how does credibility (or lack thereof) affectthe aggregate supply curve?