Corona virus is estimated to cause a severe negative shock in output Y. Using the Money market/exchange rate Market graphs-toolkit, show what the short run impact in money market (money demand) will be and in US interest rates, exchange rates, current account and US output Y. Show what the Fed should do to counterbalance this negative effect using monetary policy. Is this what the Fed did and what was the realized impact in short run exchange rates and interest rates?
Corona virus is estimated to cause a severe negative shock in output Y. Using the Money...
Consider a world in which prices are sticky in the short-run and perfectly flexible in the long-run. APPP may not hold in the short run but does hold in the long-run. The world has two countries, the U.S. and England. Both countries are initially in a long-run equilibrium with fixed money supplies. a) Suppose at time T, the money supply in the United States falls permanently. Draw two diagrams with the money market diagram for the US on the left...
draw a graph
Suppose that a closed economy with zero inflation is hit by a negative shock to autonomous consumption. The government is considering (a) using fiscal policy (b) using monetary policy (c) letting the economy self-equilibrate. a. Draw graphs showing the goods market and money market in long run equilibrium before the negative AD shock. Be careful to show how the levels of the variables in each market are related.
Draw a graph (money market and the interest parity graph) that shows both the short run and long run effect of expansionary monetary policy on the exchange rate. label the long run and short run effect on the graphs clearly. explain what is going on in the graphs.
1. Using the monetary policy tool the Fed employs most often, the Fed closes an inflationary gap. Describe the steps the economy goes through to move to the new equilibrium output and price level. Use graphs with your answer and be sure to label everything completely. 2.Explain and show on a graph the short-run and long-run equilibrium changes in the AD/AS model from expansionary monetary policy. How does this support an anti-monetary policy stance? 3. What is the equation of...
Now suppose the Fed sells $1,000,000 worth of euros in the foreign exchange market but does not sterilize the intervention. Just as above, show these transactions on the Fed’s balance sheet using the t-account. What will be the impact on international reserves, monetary base, short-term interest rates, and the exchange rate of the dollar?
6) Using money supply-money demand and the interest rate parity relationship, show how the central bank can maintain fixed exchange rates in the face of changes in output. 7) Using the DD-AA model under fixed exchange rates, show the effects of monetary policy. What are the main results? 8) Using the DD-AA model under fixed exchange rates, show the effects of fiscal policy. What are the main results? 9) Using the DD-AA model under fixed exchange rates, show the effects...
1. What occurs during a negative demand shock? Output increases and the price level decreases. Output and price level decrease. Output and price level increase. Output decreases and the price level increases. 2. In the equation of exchange, the term P × Q is the same as: the money supply. nominal GDP. national income. real GDP. 3. Expansionary monetary policy shifts the _____ curve to the _____. AD; right SRAS; left SRAS; right AD; left 4. The Taylor rule suggests...
Questions 25 and 26 Please draw the graphs of exchange
rates(E$/¥) and interest rates(iUS) using the following figure for
the Question 25 and Question 26 (vertical and horizontal axis
should be the same as given figures)
nterest rate. Exchange Rate, Es/ 1 0 25" (8 points) US and Japanese interest rates are both equal to 0.25% a year and ES/Y- 0.01. Assume foreign exchange and domestic money markets are initially in equilibrium The Federal Reserve announces (at to) an unexpected...
You know the following about the economy of a country: Consumption function: C = 12 + 0.6(YD) Government spending: G = 20 Investment function: I= 25 -50r Tax collections: T=20 Domestic price level: P = 2 Nominal money supply: MS = 360 Real Money Demand: L(r,Y)=2Y-200r Production function: Y=N Labor supply: N=100 Suppose the Federal Reserve Bank (the Fed) decides to raise interest rates to 0.14 (14%). What level of nominal money supply will achieve the Fed's target in the...
I. The economy of Zarland is operating below the full-employment level of output with a balanced budget. (a) Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supply, and aggregate demand, and show each of the following. (Gi) The country's current equilibrium output and price level, labeled Yj and PL1. respectively (ii) The full-employment output, labeled Yf (b) Ir Zarland increases government expenditures and taxes by equal amounts, can aggregate demand increase? Explain. (c) If Zarland decides to...