Homework Answers
Answer : The answer is option C.
Here 5000 is the potential output level where 3% is the real interest rate. As 5000 is the potential output level hence there exists no output gap and to reach at potential output level Fed should not change the real interest rate. Therefore, option C is correct.
Add Answer to:
Based on the diagram, if potential output equals 5,000 and the real interest rate is 3...
30. If PAE = 1,000 + 0.8Y and potential output = 5,000 you can conclude the...
30. If PAE = 1,000 + 0.8Y and potential output = 5,000 you can conclude the economy has: A. an expansionary gap. B. a recessionary gap. C. no output gap. D. no autonomous expenditure.
Planned spending is as follows: c 16 Planned spending s as follows: C = 600 +...
Planned spending is as follows: c
16 Planned spending s as follows: C = 600 + 0 7(Y-T)一200, P the following also states PAE? 200-500, G 200, NX-10 and T-1 50 which of A [905-7001 0.3Y B. 1905-700r C. 1910-700r] D. 1905-7001+07Y 17 The Fed would like to close a recessionary gap. To do this real interest rates must T This is accomplished by the money supply A increase; increasing B. increase, decreasing C. decrease, decreasing D. decrease; increasing 18....
Planned aggregate expenditure in Lotusland depends on real GDP and the real interest rate according to...
Planned aggregate expenditure in Lotusland depends on real GDP and the real interest rate according to the following equation PAE-3,000+0.8Y-2,000r. The Bank of Lotusland, the central bank, has announced that it ill set the real interest rate according to the policy reaction function found the first two columns of the table below For the rates of inflation given, find autonomous expenditure and short-run equilbrium output in Lotusland. Autonomous inflation rate, π 0.00 0.01 0.02 0.03 0.04 Real interest rate, c...
Assume that the economy of Cranberry Republic is characterized by the following IS-LM-PC model: Phillips curve:...
Assume that the economy of Cranberry Republic is characterized by the following IS-LM-PC model: Phillips curve: 7 = The + 0.0006(Yt-Yn) where it is the inflation rate at year t, ze is the level of inflation that people expect at the beginning of yeart, Yt is the actual level of output and Yn is the potential output. IS equation: Y = 1,450 -5,000 rt LM equation: 14 = Suppose that people form their expectation according to: TT = Tt-1 a....
The potential GDP line is a ________ on the Keynesian Cross diagram which indicates GDP at...
The potential GDP line is a ________ on the Keynesian Cross diagram which indicates GDP at its potential on the horizontal axis. vertical line horizontal line sloping upward line The pure Keynesian AD-AS model assumes that for any level of GDP below potential, any change in AD affects real GDP, but NOT the ________. price level output level spending level Suppose an economy is defined by the following: C = 136 + 0.9 (Yd). The (Yd) in this algebraic equation...
6.The Aggregate Demand (AD) curve is obtained by combining: (a) The consumption function, planned investment and...
6.The Aggregate Demand (AD) curve is obtained by combining: (a) The consumption function, planned investment and the central bank's policy reaction function. (b) The consumption function and the Taylor rule. (c) The equation for PAE, the central bank's policy reaction and Y = PAE. (d) Y=PAE and the consumption function. (e) The equation for planned investment and the central bank policy reaction function. 7.The AD curve is generally assumed to have a negative slope. However, which of the following would...
According to the Fisher equation, the real interest rate is given by a zero. b. the...
According to the Fisher equation, the real interest rate is given by a zero. b. the nominal interest rate plus the rate of inflation c. the nominal interest rate minus the rate of unemployment. d. the rate of economic growth. e. the nominal interest rate minus the rate of inflation An implication of sticky inflation is that, through monetary policy changes, the Federal Reserve a. has no impact on inflation b. can alter the real interest rate in the long...
QUESTION 10 0.36 points Save Answer LRAS Aggregate price level P, AD, Real GDP In response to the high unemployment rate and low level of real GDP at point El in the diagram above, the Federal Op...
QUESTION 10 0.36 points Save Answer LRAS Aggregate price level P, AD, Real GDP In response to the high unemployment rate and low level of real GDP at point El in the diagram above, the Federal Open Market Committee (the decision-making body of the Federal Reserve) decides to engineer a decrease in interest rates. If no other disturbances occurred, and the Fed calibrated its policy perfectly so that full employment equilibrium was restored, what price level would prevail at the...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve...
(i) Explain the difference between the nominal and real interest rate. (ii) How does the Reserve Bank of Australia control the interest rate? (iii) You hear a news report that output growth and inflation are lower than expected. How do you expect that report to affect market interest rates? Explain why. (iv) The Reserve Bank faces a large recessionary gap. How would you expect it to respond? Explain step by step how its policy change is likely to affect the...
Planned spending is as follows: c
16 Planned spending s as follows: C = 600 + 0 7(Y-T)一200, P the following also states PAE? 200-500, G 200, NX-10 and T-1 50 which of A [905-7001 0.3Y B. 1905-700r C. 1910-700r] D. 1905-7001+07Y 17 The Fed would like to close a recessionary gap. To do this real interest rates must T This is accomplished by the money supply A increase; increasing B. increase, decreasing C. decrease, decreasing D. decrease; increasing 18....
Planned aggregate expenditure in Lotusland depends on real GDP and the real interest rate according to the following equation PAE-3,000+0.8Y-2,000r. The Bank of Lotusland, the central bank, has announced that it ill set the real interest rate according to the policy reaction function found the first two columns of the table below For the rates of inflation given, find autonomous expenditure and short-run equilbrium output in Lotusland. Autonomous inflation rate, π 0.00 0.01 0.02 0.03 0.04 Real interest rate, c...
Assume that the economy of Cranberry Republic is characterized by the following IS-LM-PC model: Phillips curve: 7 = The + 0.0006(Yt-Yn) where it is the inflation rate at year t, ze is the level of inflation that people expect at the beginning of yeart, Yt is the actual level of output and Yn is the potential output. IS equation: Y = 1,450 -5,000 rt LM equation: 14 = Suppose that people form their expectation according to: TT = Tt-1 a....
According to the Fisher equation, the real interest rate is given by a zero. b. the nominal interest rate plus the rate of inflation c. the nominal interest rate minus the rate of unemployment. d. the rate of economic growth. e. the nominal interest rate minus the rate of inflation An implication of sticky inflation is that, through monetary policy changes, the Federal Reserve a. has no impact on inflation b. can alter the real interest rate in the long...
QUESTION 10 0.36 points Save Answer LRAS Aggregate price level P, AD, Real GDP In response to the high unemployment rate and low level of real GDP at point El in the diagram above, the Federal Open Market Committee (the decision-making body of the Federal Reserve) decides to engineer a decrease in interest rates. If no other disturbances occurred, and the Fed calibrated its policy perfectly so that full employment equilibrium was restored, what price level would prevail at the...
6. (Problem 6) An economy is facing the inflationary gap shown in the accompanying diagram. Aggregate price level LRAS SRAS Real GDP Potential —YpY output To eliminate the gap, should the central bank use expansionary or contractionary monetary policy? How will the interest rate, investment spending, consumer spending, real GDP, and the aggregate price level change as monetary policy closes the inflationary gap? The central bank can use contractionary monetary policy. The interest rate will rise, which would encourage a...
Most questions answered within 3 hours.
-
Show the rearrangements of the carbon skeleton in the following
carbocations. Note that in some cases...
asked 46 minutes ago -
Use a z -Table to find the specified area.
Between the mean and 3.01 deviations from...
asked 1 hour ago -
Consider the following reaction at equilibrium. What will happen
if O2 is added to the reaction?...
asked 1 hour ago -
Based on how much or how little you have noticed in the media,
do you think...
asked 4 hours ago -
I calculate Rosetta Stone’s P/E ratio as 10x prior to a report
about future industry growth....
asked 5 hours ago -
What major physiological changes account for electrodermal
activity (as in during a lie-detector test)?
asked 6 hours ago -
You are going to sell fruits & vegetables at a local
roadside market. List separately and...
asked 7 hours ago -
Hows does water affect the digestion of fats ?
asked 9 hours ago -
A buffer that contains 0.41 M of a base, B and 0.21 M of its
conjugate...
asked 9 hours ago -
Pleaaaaaaaasssssse help me please please it's more important
:((((((((((((((((((((
CASE STUDY
Nissan Company
Nissan Motor Company,...
asked 9 hours ago -
Calculate the concentration of hydronium and hyroxide ions in 1)
2.0 mol/L HNO3 2) 0.5 mol/L...
asked 10 hours ago -
In a loop-the-loop ride a car goes around a vertical, circular
loop at a constant speed....
asked 10 hours ago