Question
In: Economics
.Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment...
.Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases the money supply by 6%.
Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases the money supply by 6%.
a. Illustrate the short-run effects on the macroeconomy by using the aggregate demand / aggregate supply model. a. In which direction will GDP change?
b. In which direction will the price level move?
c. In which direction will unemployment move?
b. Illustrate the long-run effects on the macroeconomy by using the aggregate demand / aggregate supply model. a. In which direction will GDP change?
b. In which direction will the price level move?
c. In which direction will unemployment move?
c. Now assume this monetary contraction was completely expected. Illustrate both short-run and long-run effects on the macroeconomy by using the aggregate demand / aggregate supply model. a. In which direction will GDP change?
b. In which direction will the price level move?
c. In which direction will unemployment move?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
.Suppose the economy is in long-run equilibrium, with real GDP at $19 trillion and the unemployment...
.Suppose the economy is in long-run equilibrium, with real GDP
at $19 trillion and the unemployment rate at 5%. Now assume that
the central bank unexpectedly decreases the money supply by 6%.
Suppose the economy is in long-run equilibrium, with real GDP at
$19 trillion and the unemployment rate at 5%. Now assume that the
central bank unexpectedly decreases the money supply by 6%.
a. Illustrate the short-run effects on the
macroeconomy by using the aggregate demand / aggregate supply...
4) Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the...
4) Suppose the economy is in long-run equilibrium, with real GDP
at $16 trillion and the unemployment rate at 5%, Now assume that
the central bank unexpectedly decreases the money supply
by 6%.
a. Illustrate the short run effects on the macro-economy by
using the aggregate supply-aggregate demand model. Be sure to
indicate the direction of change in Real GDP, the Price Level and
the Unemployment Rate. Label all curves and axis for full
credit.
5) Suppose the economy is...
if the economy is in a current long run equilibrium at $8 Trillion, A) Draw the...
if the economy is in a current long run equilibrium at $8
Trillion,
A) Draw the AS/AD graph, label currecnt Equilibrium "A", what
happeins if A stock market crash causes households and businesses
to become skeptical about the future economy. Show the effect on
your graph and label the SR eq “B"
B) If the government responded by using fiscal policy
(starting from B), show where the long run equilibrium ends up,
label it “E”
C) Starting from A, what happens...
Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will
Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will
fall and the price level might rise, fall, or stay the same. In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
rise and the price level might rise, fall, or stay the same. In the long run,...
1) An economy is currently producing at an equilibrium level of real GDP of $14 trillion....
1) An economy is currently producing at an equilibrium level of
real GDP of $14 trillion. What will happen if government spending
(alone, with no other changes) decreases by $100 billion? Will real
GDP increase or decrease? Explain why it will change by $100
billion, by less, or by more.
2)Explain why rising prices reduce the spending multiplier
effect of an increase in aggregate demand.
Suppose the economy is in long-run equilibrium.
Scenario 1 - Pessimism Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time. Scenario 1 - Pessimism. Which curve shifts and in which direction? aggregate demand shifts right aggregate demand shifts left aggregate supply shifts right. aggregate supply shifts left.
Assume that the economy is at a long-run equilibrium, with unemployment at 5%, and inflation at...
Assume that the economy is at a long-run equilibrium, with
unemployment at 5%, and inflation at 2% pa. Suppose a shock causes
a very large increase in the cost of crude oil and gas. Assume that
Ireland does not produce any oil or gas, and imports large amounts
of oil and gas. The shock causes unemployment to rise to 9%, and
inflation to rise to 4% pa. Using the data, write out the equation
of the Phillips curve before, during,...
In a closed economy (in equilibrium), assume that real GDP is $15 trillion, government purchases are $1.3 trillion, public saving is $0.5 trillion, and national saving is $2.2 trillion.
ECO 252 - MacroeconomicsIn a closed economy (in equilibrium), assume that real GDP
is $15 trillion, government purchases are $1.3 trillion, public
saving is $0.5 trillion, and national saving is $2.2 trillion.
Calculate the following: a. Taxesb. Consumptionc. Investmentd. Private savinge. The government budget deficit or surplus.Precise which one.
Suppose that the economy is at long-run equilibrium. If there is a sharp decline in the...
Suppose that the economy is at long-run equilibrium. If there is
a sharp decline in the stock market combined with a significant
increase in immigration of skilled workers, then in the short
run
a. real GDP will rise and the price level might rise, fall, or stay
the same.
b. real GDP will fall and the price level might rise, fall, or stay
the same.
c. the price level will rise, and real GDP might rise, fall, or
stay the...
The economy is in long-run macroeconomic equilibrium with an unemployment rate of 8% when the government...
The economy is in long-run macroeconomic equilibrium with an
unemployment rate of 8% when the government passes a law requiring
the central bank to use monetary policy to lower the unemployment
rate to 3% and keep it there.
a) How could the central bank achieve this goal in the short
run?
b) Does your answer depend on whether demand or supply shocks
are the predominate problem faced by the nation? What might happen
In the long run? Explain verbally and...
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