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 to 200 in 2018. Explain the effect of this increase on real GDP, real GDP per capita and average labour productivity.
Homework Answers
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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...
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...
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.
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...
Question 28 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages...
Question 28 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to increase short-run aggregate supply, decrease prices, and increase real GDP increase aggregate demand, increase prices, and increase real GDP increase aggregate demand, increase prices, and decrease real GDP increase short-run aggregate supply, decrease in prices, and decrease in real GDP
Question 2 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages...
Question 2 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to increase aggregate demand, increase prices, and increase real GDP - increase aggregate demand, increase prices, and decrease real GDP increase short-run aggregate supply, decrease in prices, and decrease in real GDP o increase short-run aggregate supply, decrease prices, and increase real GDP Page 2 of 30 Previous Page Next Page
Suppose the economy is self regulating and is characterized by a recessionary gap. In the long...
Suppose the economy is self regulating and is characterized by a recessionary gap. In the long run the the price level will ----- and Real GDP will ----- Α . rise, fall rise, rise fall, rise Your answer fall, fall
Suppose the economy is self-regulating and characterized by a recessionary gap. In the long run: Real...
Suppose the economy is self-regulating and characterized by a recessionary gap. In the long run: Real wages will rise, SRAS will shift leftward, and the economy will enter into a depression. Nominal wages will remain uncahnaged, lifting hope for investors, and increasing aggregate demand. Real wages will fall, SRAS will shift rightward, and the economy will produce Natural Real GDP. Your answer the government will increase taxes and reduce net exports by raising tariffs on automobiles.
1) Suppose that the national economy is experiencing a recession with an estimated recessionary gap of...
1) Suppose that the national economy is experiencing a recession with an estimated recessionary gap of $10 billion. Congress is considering the use of fiscal policy to ease the recession, and due to current political sentiments, it has determined that the maximum spending increase the government is willing to support is $3 billion. The government wants to make up the remainder of the recessionary gap using tax cuts. If a spending increase of $3 billion is approved and the MPC...
Figure: North-West Economy a) Is North-West facing a recessionary or expansionary gap? Justify your answer. b)...
Figure:
North-West Economy
a) Is North-West facing a recessionary or expansionary
gap? Justify your answer.
b) If you are the chair of the Central Bank of this
country, which type of monetary policy, expansionary or
contractionary, would you adapt to fix the economy of North-West?
Give examples, explain and be detailed.
c) If you are the President of this country, how would
you use Fiscal policy to fix the economy of North-West? Give
examples, explain and be detailed.
North-West economy...
Suppose that the economy is shown to the right. This economy is currently experiencing O A....
Suppose that the economy is shown to the right. This economy is currently experiencing O A. a recessionary gap. O B. an inflationary gap. O C. deflation. LRAS SRAS O D. crowding out Using the line drawing tool, draw and label the fiscal policy correction that would bring the economy to full employment GDP Properly label this line. Carefully follow the instructions above, and only draw the required objects AD 2 4 6810 12 14 16 18 20 Real GDP...
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...
Question 28 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to increase short-run aggregate supply, decrease prices, and increase real GDP increase aggregate demand, increase prices, and increase real GDP increase aggregate demand, increase prices, and decrease real GDP increase short-run aggregate supply, decrease in prices, and decrease in real GDP
Question 2 (3 points) Suppose the economy currently is in a recessionary gap. The Fed engages in expansionary monetary policy. The impact of expansionary monetary policy will be to increase aggregate demand, increase prices, and increase real GDP - increase aggregate demand, increase prices, and decrease real GDP increase short-run aggregate supply, decrease in prices, and decrease in real GDP o increase short-run aggregate supply, decrease prices, and increase real GDP Page 2 of 30 Previous Page Next Page
Suppose the economy is self regulating and is characterized by a recessionary gap. In the long run the the price level will ----- and Real GDP will ----- Α . rise, fall rise, rise fall, rise Your answer fall, fall
Suppose the economy is self-regulating and characterized by a recessionary gap. In the long run: Real wages will rise, SRAS will shift leftward, and the economy will enter into a depression. Nominal wages will remain uncahnaged, lifting hope for investors, and increasing aggregate demand. Real wages will fall, SRAS will shift rightward, and the economy will produce Natural Real GDP. Your answer the government will increase taxes and reduce net exports by raising tariffs on automobiles.
Figure:
North-West Economy
a) Is North-West facing a recessionary or expansionary
gap? Justify your answer.
b) If you are the chair of the Central Bank of this
country, which type of monetary policy, expansionary or
contractionary, would you adapt to fix the economy of North-West?
Give examples, explain and be detailed.
c) If you are the President of this country, how would
you use Fiscal policy to fix the economy of North-West? Give
examples, explain and be detailed.
North-West economy...
Suppose that the economy is shown to the right. This economy is currently experiencing O A. a recessionary gap. O B. an inflationary gap. O C. deflation. LRAS SRAS O D. crowding out Using the line drawing tool, draw and label the fiscal policy correction that would bring the economy to full employment GDP Properly label this line. Carefully follow the instructions above, and only draw the required objects AD 2 4 6810 12 14 16 18 20 Real GDP...
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