Suppose you observe the time series of output y and real money supply M/ P reported in the Figure below. Nominal money supply M is under full control of the Central Bank. Output y Real Money Supply M$1P Time t Time t 1 3 4 6 1 4 6.
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- Suppose you observe the time series of output y and real money supply M/ P reported in the Figure below. Nominal money supply M is under full control of the Central Bank. Output y Real Money Supply M³/P + Time t Time t 1 3 4 6. 1 2 4 6. Interpret these time series using the ASAD Redux model with workers misperceptions (Lecture Notes, Chapter 1). Assume that the time paths are caused by a single permanent shock hitting the economy at time t = 1, and interpret time t = 6 as the medium run. Your general task is to guess what type of shock can be responsible for the observed time series. Answer each of the following questions, providing clear motivation for your statements: %3D (B) Can the shock be a permanent change, positive or negative, in nominal money supply Ms ? Motivate your answer. wwwUnit Activity: Mathematical Models and Investments Part D Jacob lost his job and now has to buy health insurance on his own. Why are his premiums likely to increase? BIUX² X₂ 15px 注 注 有 無 ≡ ≡ V v V Space used (includes formatting): 0 / 15000 Space used (includes formatting): 0/-15000 A V Part E Describe a person who would not need life insurance. BIUX² X₂ 15px A N ▸ A Apr 15 6 of 11 10:01 S 4Using the macro model we learned in this class (MP-IS and AD-AS framework) consider the current crisis. 1. Identify the basic impacts of the Covid shutdowns on the macro economy. Explain how and why each curve will be affected. Graphically show your analysis. 2. Consider the monetary policy responses to the current crisis. Develop separate analysis for an economy which have positive policy rates vs an economy which is at the zero lower bound. Would it require different monetary policies? If so how? What would you expect to happen to the inflation rate, unemployment rate, economic growth in the near future? Use graphs for each case.
- Suppose you observe the time series of output y and real money supply M/ P reported in the Figure below. Nominal money supply M is under full control of the Central Bank. Output y Real Money Supply M$/P + + + Time t Time t 1 3 4 6. 1 3 4 6. Interpret these time series using the ASAD Redux model with workers misperceptions (Lecture Notes, Chapter 1). Assume that the time paths are caused by a single permanent shock hitting the economy at time t= 1, and interpret time t = 6 as the medium run. Your general task is to guess what type of shock can be responsible for the observed time series. Answer each of the following questions, providing clear motivation for your statements: (C) Can the shock be a permanent change, positive or negative, in firms productivity 2? Motivate your answer.Describe the difference betweenan exogenous and an endogenous theory about the money supply.In your view what importantdifferences between the twotheories exist?12. Given the IS – LM model Goods Market Money Market C = a+bYd M = N, + mY - rR yd =Y-T M = M. T=T, +tY Md = M G=G, I = I, - dR Y = C+I+G a) Derive the IS and LM equations b) Find ÔR ÔY OR ÔY OR OG,' OG, ÔT,' ôT, ÔM,’ôM,
- Which of the following statements is true for the scenario illustrated in the below diagram? LRAS Price Level (base year = 100) 120 110 100 90 80 400 SRAS E₁ 700 Eo AD AD₁ 500 600 Real Output (constant dollars) 800 O it illustrates a recessionary gap at Eo Oit illustrates expansionary monetary policy by shifting ADO to AD1 O it illustrates procyclical monetary policy O it can be caused by a tightening of the money supply, also known as contractionary monetary policyThe quantity theory of money: What is the key endogenous variable in the quan-tity theory? Explain the efect on this key variable of the following changes: (a) Te money supply is doubled.(b) Te velocity of money increases by 10%.(c) Real GDP rises by 2%.(d) Te money supply increases by 3% while real GDP rises by 3% at thesame timeSuppose now that economists expect the velocity ofmoney to increase by 50% as a result of the monetarystimulus. What will be the total increase in nominalGDP?
- As monetary policymakers become more concernedwith inflation stabilization, the slope of the aggregatedemand curve becomes flatter. How does the resulting change in the slope of the aggregate demand curvehelp stabilize inflation when the economy is hit with atemporary negative supply shock? How does this affectoutput? Use a graph of aggregate demand and supply todemonstrate.https://aplia.apps.ng.cengage.com/af/servlet/quiz?ctx=bkhana-0031&quiz_action=takeQuiz&quiz_probGuid=... A to Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run. For example, an increase in the money supply, a variable, will cause the price level, a variable, to increase but will have variable. The notion that an increase in the no long-run effect on the quantity of goods and services the economy can produce, a quantity of money will impact the price level but not the output level is known as In the short run, however, most economists believe that real and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggregate supply (AS) diagram-it needs appropriate labels for the axes and curves. You will…Consider an economy that may be represented by the following short-run IS-LM model described by equations (1) through (6): (1) C 200+ 0.8(Y-T) (2) T = 800 (3) G = 500 (4) 1 700 - 25 r (5) Y=C+I+G (6) M/P = 0.6Y - 60r where the nominal money supply is M-600 and the price level is P = 1. Suppose that the government increases its expenditures by 100 units, but the Bank of Canada would like to maintain the interest rate constant. Then, (approximately) the money supply must decrease by 125.5 units and equilibrium output increases by 200 units. the money supply must decrease by 100 units and equilibrium output increases. by 250 units. the money supply must increase by 300 units and equilibrium output increases by 500 units the money supply must increase by 60 units and equilibrium output increases by 100 units.