Question
In: Economics
Assume a closed economy. Suppose you have the following information regarding Country A: Long run real...
Assume a closed economy. Suppose you have the following information
regarding Country A: Long run real GDP growth rate = 2.5%, natural rate of
unemployment = 5%, long run inflation rate = 2.5%. Currently, real GDP is
growing at 1.4%, unemployment is at 6.4%, and inflation is .7%.
a. Using the IS-LM model and AD-AS, describe fully the current state of the
economy both graphically and in words.
b. What monetary policy measures would you advocate? Why? How would
they work and what would they do in the short run? In the long run?
c. What fiscal policy measures would you advocate? Why? How would
they work and what would they do in the short run? In the long run?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Assume a closed economy. Suppose you have the following information regarding Country A: Long run real...
Assume a closed economy. Suppose you have the following
information regarding Country A: Long run real GDP growth rate =
2.5%, natural rate of unemployment = 5%, long run inflation rate =
2.5%. Currently, real GDP is growing at 1.4%, unemployment is at
6.4%, and inflation is .7%.
a. Using the IS-LM model and AD-AS, describe fully the current
state of the economy both graphically and in words.
b. What monetary policy measures would you advocate? Why? How
would they...
Consider a closed economy income-expenditure model of the economy where the country begins in a long-run...
Consider a closed economy income-expenditure model of the
economy where the country begins in a long-run equilibrium. •
Investment (I) and government spending (G) are fixed: I = 41.5, G =
26. • The income tax rate is t = 6.25%, so tax revenue equals T =
tY . • The consumption function is C = 12 + 0.8Yd, where Yd = (1 −
t)Y . For the calculations below, write your answers as either a
fraction or to two...
“COVID-19 Impacton Economy” Assume the economy of country A is in a long-run equilibrium with full...
“COVID-19 Impacton Economy”
Assume the economy of country A is in a long-run equilibrium
with full employment. The nominal wage of workers are fixed in the
short run.
a)Draw a graph which shows the short-run aggregate supply,
long-run aggregate supply, and aggregate demand. Describe the
equilibrium point and show each of the following:
i ) Equilibrium output, labelled Y1
ii) Equilibrium price level, labelled P1.
b)Owing to the outbreak of COVID19, the export market of country
A has decreased. On...
.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...
.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...
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.
53.) Assume that the economy is initially in a long-run equilibrium. Now suppose that businesses and...
53.) Assume that the economy is initially in a long-run
equilibrium. Now suppose that businesses and households become more
pessimistic about the future and decide to invest less in new
structures, tools, and equipment, and also decide to engage in less
consumption spending, at the current price level.
a.) What will happen to output and the price level in the short
run? Output will (rise, fall, stay the same) and the price level
will (rise, fall, stay the same). (2...
Suppose we have an economy which is in a long-run equilibrium. a) Graph this economy using...
Suppose we have an economy which is in a long-run
equilibrium.
a) Graph this economy using long-run and
short-run Phillips curves
b) Now suppose the aggregate demand decreased
as the government spending is reduced. Show what happens to the
economy on a Phillips curve graph. Where is the economy’s current
position on the graph now? Is it possible to return to the original
position (with the initial inflation and unemployment levels)
through monetary policy? Explain
c) Now, you should consider...
4-) Suppose we have an economy which is in a long-run equilibrium. a) Graph this economy...
4-) Suppose we have an economy which is in a long-run
equilibrium.
a) Graph this economy using long-run and short-run Phillips
curves.
b) Now suppose the aggregate demand decreased as the
government spending is reduced. Show what happens to the economy on
a Phillips curve graph. Where is the economy’s current position on
the graph now? Is it possible to return to the original position
(with the initial inflation and unemployment levels) through
monetary policy? Explain.
c) Now, you should...
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