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2. The Standard IS Curve Suppose that the initial parameters of the IS curve are a...
1) If an economy has a horizontal Phillips curve and experiences a recession, inflation: a. falls....
1) If an economy has a horizontal Phillips curve and experiences a recession, inflation: a. falls. b.does not change. c.rises sharply. d.rises, but not very much. e.falls sharply. 2)According to the Phillips curve, in general during an expansion a.inflation rises. b.inflation falls. c.unemployment falls. d.inflation is constant. e.prices fall. 3)If prices are flexible (as in the long run) and the Fed lowers the nominal interest rate (ceteris paribus), __________ and, as a result, __________. a.the real interest rate falls; short-run...
1) The long-run aggregate supply curve shifts to the right when there is A) a decrease...
1) The long-run aggregate supply curve shifts to the right when there is A) a decrease in the total amount of capital in the economy. B) a decrease in the total amount of labor supplied in the economy. C) a decrease in the available technology. D) a decline in the natural rate of unemployment. 2) The short-run aggregate supply curve shifts to the right when A) output gap is higher. B) output gap is lower. C) expected inflation is higher....
Assignment Score: Give Up 100/400 Resources Hint Check Answer Question 2 of 4 Suppose the Fed reduces the money su...
Assignment Score: Give Up 100/400 Resources Hint Check Answer Question 2 of 4 Suppose the Fed reduces the money supply by 5 percent. Assume the velocity of money (V) is constant a. What happens to the aggregate demand (AD) curve? The AD curve shifts b. What happens to output and the price level in the short run and long run? Give precise numerical answers. In the short run, the price level decreases by percent. c. In the short run, output...
2. Suppose that we are in a world where short-term prices are sticky, but not fixed....
2. Suppose that we are in a world where short-term prices are sticky, but not fixed. The Fed decides that it wants to increase output. A.) According to the Phillips curve, what is the short-run/long-run tradeoff that the Fed is making in this situation? (quid pro quo, Clarice?) B.) What must the Fed do to the money supply? C.) Describe the graphical changes that take place in the market for real money. D.) In the short-run, what happens to interest...
Using the IS-LM and Aggregate Supply-Aggregate Demand (AS-AD) models of Chapter 12 with a flat short-run...
Using the IS-LM and Aggregate Supply-Aggregate Demand (AS-AD) models of Chapter 12 with a flat short-run AS curve (that is, completely sticky prices), suppose the economy is at the natural rate of unemployment and so, at long-run equilibrium. Suddenly, taxes are reduced with no change in government spending. Tell me (or show on a graph) what happens to the IS and/or LM curves. Show on a different graph what happens on the AS-AD diagram in the short-run (drawing in the...
Suppose that the aggregate expenditure curve for an economy can be expressed algebraically as AE =...
Suppose that the aggregate expenditure curve for an economy can be expressed algebraically as AE = 3,000 – 2,000r, where AE is aggregate expenditures and r is the real interest rate expressed as a decimal. If the level of potential output in this economy is 2,825, what is the long-run real interest rate? Instructions: Enter your response as a percent rounded to one decimal place. The long-run real interest rate: ____ %
Looking for solutions, thanks a lot. Problem #1 Consider an economy where the LM curve can...
Looking for solutions, thanks a lot.
Problem #1 Consider an economy where the LM curve can be represented with M A+1500 50000(i-0.03) where A is a constant. Furthermore rate according to the following rule assume that the central bank in this economy sets the interest - n*) -) + Assume that the optimal inflation rate is equal to 0.02 and the equilibrium real interest rate, p, is equal to 0.01. Finally, let the potential output 0 Assume that initially the...
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...
b. Assume that the economy starts with no output gap in the graphs above (at A)....
b. Assume that the economy starts with no output gap in the graphs above (at A). Next, assume an increase in the real interest rate occurs. i. (10) Show this both graphs above and label point B in each. (explain on next page). Label all new axes values that result from this. (16) Fully explain what happens in the short run to output, unemployment, and inflation in response to this increase in interest rates. Styles d. Change of inflation (TA)...
1) The long-run aggregate supply curve shifts to the right when there is A) a decrease in the total amount of capital in the economy. B) a decrease in the total amount of labor supplied in the economy. C) a decrease in the available technology. D) a decline in the natural rate of unemployment. 2) The short-run aggregate supply curve shifts to the right when A) output gap is higher. B) output gap is lower. C) expected inflation is higher....
Assignment Score: Give Up 100/400 Resources Hint Check Answer Question 2 of 4 Suppose the Fed reduces the money supply by 5 percent. Assume the velocity of money (V) is constant a. What happens to the aggregate demand (AD) curve? The AD curve shifts b. What happens to output and the price level in the short run and long run? Give precise numerical answers. In the short run, the price level decreases by percent. c. In the short run, output...
2. Suppose that we are in a world where short-term prices are sticky, but not fixed. The Fed decides that it wants to increase output. A.) According to the Phillips curve, what is the short-run/long-run tradeoff that the Fed is making in this situation? (quid pro quo, Clarice?) B.) What must the Fed do to the money supply? C.) Describe the graphical changes that take place in the market for real money. D.) In the short-run, what happens to interest...
Using the IS-LM and Aggregate Supply-Aggregate Demand (AS-AD) models of Chapter 12 with a flat short-run AS curve (that is, completely sticky prices), suppose the economy is at the natural rate of unemployment and so, at long-run equilibrium. Suddenly, taxes are reduced with no change in government spending. Tell me (or show on a graph) what happens to the IS and/or LM curves. Show on a different graph what happens on the AS-AD diagram in the short-run (drawing in the...
Looking for solutions, thanks a lot.
Problem #1 Consider an economy where the LM curve can be represented with M A+1500 50000(i-0.03) where A is a constant. Furthermore rate according to the following rule assume that the central bank in this economy sets the interest - n*) -) + Assume that the optimal inflation rate is equal to 0.02 and the equilibrium real interest rate, p, is equal to 0.01. Finally, let the potential output 0 Assume that initially 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...
b. Assume that the economy starts with no output gap in the graphs above (at A). Next, assume an increase in the real interest rate occurs. i. (10) Show this both graphs above and label point B in each. (explain on next page). Label all new axes values that result from this. (16) Fully explain what happens in the short run to output, unemployment, and inflation in response to this increase in interest rates. Styles d. Change of inflation (TA)...
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