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f actual output exceeds potential output, the economy O is experiencing an inflationary gap. O may...
1. Suppose an economy is experiencing higher inflation rate as well as a recessionary gap. Using...
1. Suppose an economy is experiencing higher inflation rate as well as a recessionary gap. Using the policy reaction function, explain whether the Reserve bank will increase or decrease the interest rate? 2. Explain the effect of an increase in imports on the equilibrium output and inflation in the AD-AS model. Carefully distinguish between the short run and the long run. Would this affect the potential output? Why/Why not? 3. Suppose capital in Country A increases from 100 in 2017...
1. Suppose an economy is experiencing higher inflation rate as well as a recessionary gap. Using...
1. Suppose an economy is experiencing higher inflation rate as well as a recessionary gap. Using the policy reaction function, explain whether the Reserve bank will increase or decrease the interest rate? 2. Explain thee effect of an increase in imports on the equilibrium output and inflation in the AD-AS model. Carefully distinguish between the short run and the long run Would this affect the potential output? Why/Why not? 3. Suppose capital in Country A increases from 100 in 2017...
Refer to the figure below. Suppose the economy is in a short-run equilibrium at output Y3...
Refer to the figure below. Suppose the economy is in a short-run
equilibrium at output Y3 and inflation rate
π2. The economy is currently experiencing ______, and
the correct monetary policy response to this situation, to return
the economy to potential GDP, is to ______.
Select one:
a. a recessionary gap; raise taxes
b. an expansionary gap; cut taxes
c. a recessionary gap; increase the money supply
d. an expansionary gap; decrease the money supply
Inflation rate ASI AS2 AD...
2. According to chapter 10 of the lectures, every society or economy has a potential output...
2. According to chapter 10 of the lectures, every society or economy has a potential output also called natural rate of output or full-employment rate of output or long-run aggregate supply. What factors determine the size of an economy’s potential output? 3. Societies don’t always produce their potential output level in the short run. Sometimes they might have an expansionary gap and sometimes a recessionary gap. a. What is an expansionary gap? b. What is a recessionary gap?
A recessionary gap exists when the macro economy is in equilibrium at less than the potential...
A recessionary gap exists when the macro economy is in equilibrium at less than the potential output of the the economy because aggregate demand is insufficient to fully employ all of society's resources. In other words, the equilibrium (AD = AS) occurs to the left of the vertical long-run supply curve. At this point, potential output is reached (full employment) and if any unemployment occurs, then it is due to structural or frictional, that is, the economy is at its...
QUESTION 7 When a recessionary gap occurs C a. real output exceeds the natural level of...
QUESTION 7 When a recessionary gap occurs C a. real output exceeds the natural level of output, and unemployment exceeds its natural rate b, real output exceeds the natural level, and unemployment is less than its natural rate C c.real output is less than the natural level of output, and unemployment exceeds it natural rate C d. real output is less than the natural level of output, and unemployment is less tha its natural rate QUESTION 8 What is a...
Starting with the graphs below identify which is the inflationary gap and which is the recessionary...
Starting with the graphs below identify which is the inflationary gap and which is the recessionary gap. Then show and explain how the equilibrium will move back to the point where actual equal potential GDP without any government action.. As AS AD o Real GOP 1 Real GDP
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather...
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment mechanism to operate is that O A private sector expenditures increase on their own, the policy will stabilize real GDP. OB. It will shorten what might otherwise be a long recession OC. will reduce the inflationary pressure on prices that would otherwise ocur. OD. It wil dose the output gap. Click to select your answer MacBook Air Assume...
Assume that the economy is currently in short run equilibrium but experiencing a recessionary gap. -Graphically...
Assume that the economy is currently in short run equilibrium but experiencing a recessionary gap. -Graphically illustrate the problem -Identify the combination of monetary policies that the Federal Reserve would pursue to correct problem -Graphically illustrate and explain how these monetary policies affect the market for reserves, the market for M1, and the market for real goods and services (AD-AS) -Make sure that you identify the Fed’s goals/objectives and also graphically illustrate the solution.
FEE If real GDP is greater than potential GDP, the economy is O A. in a...
FEE If real GDP is greater than potential GDP, the economy is O A. in a below full - employment equilibrium. OB. in a long-run equilibrium. O C. not in a short - run macroeconomic equilibrium. OD. in a recessionary equilibrium. O E. in an above full - employment equilibrium. 7:30
1. Suppose an economy is experiencing higher inflation rate as well as a recessionary gap. Using the policy reaction function, explain whether the Reserve bank will increase or decrease the interest rate? 2. Explain thee effect of an increase in imports on the equilibrium output and inflation in the AD-AS model. Carefully distinguish between the short run and the long run Would this affect the potential output? Why/Why not? 3. Suppose capital in Country A increases from 100 in 2017...
Refer to the figure below. Suppose the economy is in a short-run
equilibrium at output Y3 and inflation rate
π2. The economy is currently experiencing ______, and
the correct monetary policy response to this situation, to return
the economy to potential GDP, is to ______.
Select one:
a. a recessionary gap; raise taxes
b. an expansionary gap; cut taxes
c. a recessionary gap; increase the money supply
d. an expansionary gap; decrease the money supply
Inflation rate ASI AS2 AD...
A recessionary gap exists when the macro economy is in equilibrium at less than the potential output of the the economy because aggregate demand is insufficient to fully employ all of society's resources. In other words, the equilibrium (AD = AS) occurs to the left of the vertical long-run supply curve. At this point, potential output is reached (full employment) and if any unemployment occurs, then it is due to structural or frictional, that is, the economy is at its...
QUESTION 7 When a recessionary gap occurs C a. real output exceeds the natural level of output, and unemployment exceeds its natural rate b, real output exceeds the natural level, and unemployment is less than its natural rate C c.real output is less than the natural level of output, and unemployment exceeds it natural rate C d. real output is less than the natural level of output, and unemployment is less tha its natural rate QUESTION 8 What is a...
Starting with the graphs below identify which is the inflationary gap and which is the recessionary gap. Then show and explain how the equilibrium will move back to the point where actual equal potential GDP without any government action.. As AS AD o Real GOP 1 Real GDP
Consider an economy with an inflationary gap. The advantage of using a contractionary fiscal policy rather than allowing the economy's natural adjustment mechanism to operate is that O A private sector expenditures increase on their own, the policy will stabilize real GDP. OB. It will shorten what might otherwise be a long recession OC. will reduce the inflationary pressure on prices that would otherwise ocur. OD. It wil dose the output gap. Click to select your answer MacBook Air Assume...
FEE If real GDP is greater than potential GDP, the economy is O A. in a below full - employment equilibrium. OB. in a long-run equilibrium. O C. not in a short - run macroeconomic equilibrium. OD. in a recessionary equilibrium. O E. in an above full - employment equilibrium. 7:30
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