Does the assumption of stuck prices hold true when the economy moves close to its potential...

Does the assumption of stuck prices hold true when the economy moves close to its potential output? Explain.

Solutions

Expert Solution

Rahul Sunny answered 4 weeks ago

Next > < Previous

Related Solutions

what if zero mean assumption does not hold? whats the consequences?

The implicit assumption, when economists assess the performance of an economy by looking at its level...

The implicit assumption, when economists assess the performance of an economy by looking at its level of income per person or at its growth rate, is that higher income per person leads to more happiness. Does money lead to happiness? Back up your answer with concrete evidence (such as research findings).

Using a simple graph, show that the assumption of constant variance does not hold for a...

Using a simple graph, show that the assumption of constant variance does not hold for a data set.

True, False, Uncertain, Explain (intuitively and graphically) Does paradox of thrift result still hold true when...

True, False, Uncertain, Explain (intuitively and graphically) Does paradox of thrift result still hold true when in the IS-LM framework? Use the case where consumer confidence is falling. How might this affect private savings and investment spending. Hint: your answer can be motivated in part by the ID = Sn identity.

If general equilibrium prices hold in every market in an economy, then, compared to the equilibrium...

If general equilibrium prices hold in every market in an economy, then, compared to the equilibrium allocation: Group of answer choices If some resources were moved from the production of good x to the production of good y, then the amount produced of each good must go down If some resources were moved from production of good x to production of good y, at least some consumers would have to give up more x than they are willing to trade...

When an electrode is stuck inside an intact squid giant axon, the membrane potential registers -70mV....

When an electrode is stuck inside an intact squid giant axon, the membrane potential registers -70mV. When the axon, suspended in a bath of seawater, is stimulated to conduct an impulse, the membrane potential changes transiently to +40mV. For univalent ions at 20oC, the Nernst equation reduces to: V(membrane potential) = 58mV x log10(Co/Ci) Where Co and Ci are the extra and intracellular concentrations of the ion respectively (see table below). Ion [cytoplasm] [seawater] Na+ 65mM 430mM K+ 344mM 9mM...

Assuming the economy is operating below its potential output, how does an increase in net exports...

Assuming the economy is operating below its potential output, how does an increase in net exports affect real GDP? Why is it difficult, perhaps even impossible, for a country to boost its net exports by increasing its tariffs during a global recession? Use examples.

A particle of mass ? moves in one dimension along the ?- axis. Its potential energy...

A particle of mass ? moves in one dimension along the ?- axis. Its potential energy is given by ?(?) = ??3 − ??, where ? and ? are positive constants. (a) Calculate the force on the particle, ?(?). Find the position of all equilibrium points and identify them as stable or unstable. (b) Draw an energy diagram showing the potential energy U, the kinetic energy K, and the total mechanical energy E for bound motion. Show the location of...

Short-run economic fluctuations occur when a shock moves a short-run equilibrium not at potential output when...

Short-run economic fluctuations occur when a shock moves a short-run equilibrium not at potential output when potential output increases when potential output decreases prices have fully adjusted to a shock A key feature of Keynesian economics is the prices are _______________. Therefore, if the economy goes into recession, without an policy intervention recovery will be ____________. sticky, slow flexible, fast stickly, quick flexible, slow Economic fluctuations that cause lower production, higher unemployment and lower inflation are caused by which of...

Suppose interest parity does not hold exactly, but the true relationship is R = R∗ +...

Suppose interest parity does not hold exactly, but the true relationship is R = R∗ + (Ee − E)/E + ρ(B), where ρ(B) is a risk premium on domestic government bonds that positively depends on B. Suppose a temporary rise in domestic government spending is financed by issuing additional government debt (an increase in B) and makes do- mestic public bonds risk premium higher. Evaluate the policy’s output effects in this situation.

Subjects