Question 3. Compare an economy with a vertical ERU curve with an otherwise identical economy with...

Question 3. Compare an economy with a vertical ERU curve with an otherwise identical economy with a downward-sloping ERU curve. (a) Briefly explain how these economies differ

Expert Solution

Rahul Sunny answered 2 years ago

What are the differences between an economy with a vertical ERU curve and an economy with...

What are the differences between an economy with a vertical ERU curve and an economy with a downward-sloping ERU curve?

An open economy with a downward sloping ERU curve is at the long-run equilibrium. Suddenly, the...

An open economy with a downward sloping ERU curve is at the long-run equilibrium. Suddenly, the elasticity of demand for the monopolistically competitive firm's output η increases from 6 to 11. At the same time, labor productivity λ decreases from 12 to Z. After this ___(a)____ supply shock, the economy will transition to a new medium run equilibrium characterized by ___(b)____ real exchange rate, ___(c)____ level of output, ___(d)____ real consumption wage, and a trade ___(e)____. (Hint: choose your answers...

What would cause the IS curve to be vertical? Assuming that the IS curve is vertical,...

What would cause the IS curve to be vertical? Assuming that the IS curve is vertical, what will the corresponding AD curve look like?

(a)The shape of ERU curve depends on the definition of the real wage. Using appropriate diagrams,...

(a)The shape of ERU curve depends on the definition of the real wage. Using appropriate diagrams, describe the two definitions of the real wage that brings about the differences in the shape of the ERU curve. (b) Using AD-BT-ERU and WS-PS diagrams, analyze the following shocks to the equilibrium unemployment, real exchange rate, trade balance, and real wage (W/Pc). (i) A rise in mark-up due to weaker competition policy rules. (ii) An increase in union bargaining power. (iii) An increase...

please compare and explain the IS-LM curve in a closed economy and a small open economy

In an open economy, why is the supply curve in the foreign-currency exchange market vertical? Net...

In an open economy, why is the supply curve in the foreign-currency exchange market vertical? Net capital outflow is determined by real GDP, not the real exchange rate. Net capital outflow is extremely sensitive to small changes in the real exchange rate. Net capital outflow is determined by the real interest rate, not the real exchange rate. Net capital outflow equals net exports.

Question 1 What does a vertical supply curve of money indicate? a. It indicates that the...

Question 1 What does a vertical supply curve of money indicate? a. It indicates that the larger the supply of money, the higher the interest rate, all things equal. b. It indicates that the quantity of money supplied depends on the interest rate. c. It indicates that the lower the interest rate, the higher the opportunity cost of holding assets in the form of money. d. It indicates that the quantity of money supplied is independent of the interest rate....

3. Use relevant diagrams to answer the following: (Assume a closed economy unless stated otherwise) a....

3. Use relevant diagrams to answer the following: (Assume a closed economy unless stated otherwise) a. The stock market just crashed; the Dow Jones Industrial Average fell by 750 points. How does this impact the goods market equilibrium interest rate, savings and investment? b. Suppose your company is in equilibrium, with its capital stock at its desired level. A permanent decline in the expected real interest rate now has what effect on your desired capital stock? c. If consumers foresee...

A vertical sag curve connects two tangents with grades -3% and +2% with the design speed...

A vertical sag curve connects two tangents with grades -3% and +2% with the design speed of 100 km/h. (a) Calculate the available sight distance and the length of the vertical curve using the minimum flatness of curve that will satisfy the headlight criterion during dark conditions. Assume the height of the headlight above the pavement is 0.6 m and the angle of the light beam upward from the axis of beam is 1. (a) Assuming that the length of...

please answer on question. Compare horizontal and vertical FDI impact on the volume of international trade...

please answer on question. Compare horizontal and vertical FDI impact on the volume of international trade and the economies of home and host countries.

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