Suppose the following graph is the current condition of the U.S. economy. Answer the following questions...

Suppose the following graph is the current condition of the U.S. economy.

Answer the following questions based on this graph.

(10 points) Based on the graph, what type of gap is the U.S. economy experiencing?
(40 points) From the Keynesian View—
a. Is the issue on the demand or supply side of the economy?
b. What government actions would be recommended?
c. According to the Phillips curve, what would happen to the price level if we pursue policies to lower unemployment?
d. What did Keynes mean by “sticky prices”?
(30 points) From the Neoclassical View—
a. What change needs to happen in our graph to bring the U.S. economy back to potential output?
b. How will this happen?
c. Would this lead to more or less inflation that the Keynesian actions?
(10 points) From 2007-2009 the US experienced one of its worst economic collapses. Which approach did the U.S. government follow in regards to the economy—Keynesian or Neoclassical?
(10 points) In Spring 2020, the U.S. economy once again found itself in an economic crisis, this time due to the COVID-19 pandemic. Which approach did the U.S. government follow in regards to the economy—Keynesian or Neoclassical?

Expert Solution

Answer 1:

Given the current condition of the US economy it can be stated that the economy is experiencing Recessionary gap because actutal level of GDP in the economy is below the potential level of GDP given the current market conditions.

a. According to Keynesian view, this is a demand dide issue for the economy.

b. To eliminate the recessionary gap in the economy, it is advisable for the government to follow expansionary fiscal policy which involves increasing the level of government expenditure and reducing tax rate which will shift aggregate demand rightwards and helps in eliminating recessionary gap in the economy.

c. Since there exists negative relationship between unemployment rate and price level according to Phillips Curve, the policies to pursue lower unemployment level will increase the level of inflation in the economy.

d. When prices do not change easily because it takes time for expenctations of people to adjust, this is known as Sticky prices.

Rahul Sunny answered 1 year ago

Suppose inflationary expectations in the economy decrease. The following graph shows the market for bonds in the U.S

15. The Fisher effect Suppose inflationary expectations in the economy decrease. The following graph shows the market for bonds in the U.S. The upward-sloping orange line represents the supply of bonds, and the downward-sloping blue line represents the demand for bonds. Adjust the following graph to show the effect of decreased inflationary expectations on the bond market. The following graph shows the market for loanable funds in the U.S. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line...

Answer the following questions for the U.S. and Russia: Is the economy more capitalistic, more centrally...

Answer the following questions for the U.S. and Russia: Is the economy more capitalistic, more centrally planned, or in between? What have been the economic conditions in the last 5-20 years? What has been the inflation rate, unemployment rate, GDP growth rate?

Questions in Graph Theory: In the subject of the degree sequence of graph, answer the following:...

Questions in Graph Theory: In the subject of the degree sequence of graph, answer the following: When does a d-regular graph have an Eulerian trail? and When does it have an Eulerian circuit? Note: a d-regular graph is one with degree sequence (d, d, d, . . . , d) for example. Can a tree be a regular graph? Why or why not

Answer questions 11 and 12 based on the following problem. Problem: Suppose that a U.S. MNC...

Answer questions 11 and 12 based on the following problem. Problem: Suppose that a U.S. MNC has a payable of EUR 10,000 due in three months. The current spot rate of EUR is USD 1.2000, the current 3-month forward rate of EUR is USD 1.1760, which is above the MNC’s own expected future spot rate of USD 1.1755. The current Americanstyle call option due in three months is USD 1.1750 and the current American-style put option due in three months...

Consider the following graph in the conext of project manageemnt and answer the following questions:

Consider the following graph in the conext of project manageemnt and answer the following questions:a) Define four type of cost of quality as mentioned in above figure with examples.b) Consider any mega project and explain which cost is most important for project manager to take extra care during project management?c) What extra precuations as a manager you will take to minimize the most important cost you have choosen in above part (b).

The following graph shows the current short-run Phillips curve for a hypothetical economy

5. Monetary policy and the Phillips curve The following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rate and inflation rate. Assume that the economy is currently in long-run equilibrium. Suppose the central bank of the hypothetical economy decides to decrease the money supply. On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy. In the...

Answer the following unrelated short-answer questions. a. An economist makes the following argument – “The economy...

Answer the following unrelated short-answer questions. a. An economist makes the following argument – “The economy basically self-corrects out of recessions. When the economy is in recession, unemployment creates an excess supply of labor, which causes wages to fall. As a result, employers increase their hiring and the economy recovers automatically.” How would a Keynesian respond to this claim? b. Consider an economy where the reserve ratio is ? = 0.2 and the currency ratio is ? = 0.2. What...

briefly discuss the key features of the current U.S economy and your overall assessment. Your answer...

briefly discuss the key features of the current U.S economy and your overall assessment. Your answer should mention data for real GDP, growth, inflation, unemployment, etc

Answer the following questions for the U.S. and Russia: What are the major imports to, and...

Answer the following questions for the U.S. and Russia: What are the major imports to, and exports from, the country? What are top 5-10 trading partners as measure by dollar value of imports and exports?

1. Use the AD-AS model to answer the following questions. Suppose that an economy is initially in its long-run equilibrium.

1. Use the AD-AS model to answer the following questions. Suppose that an economy is initially in its long-run equilibrium. (a) Suppose now that the interest rate rises sharply. 1. Explain what will happen to consumption and investment. 2. Graphically and verbally explain how the increase in the interest rate will change AD, LRAS, and/or SRAS and thus will change the output level and the price level in the short run. (b) Suppose now that after the...

Question