There is a predictable negative relationship between the output gap and the unemployment rate but it is not one to one. This is known as what? Keynesian Law The Quantitative Theory of Money. Phillips' Law. Okun's Law
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- In the Keynesian theory, money wages do not fall response to a decrease in aggregate demand . a. true b. falseOne of the business cycle factsis that “the nominal money supply is a pro-cyclicaland leading variable”. Traditional Keynesian theory explains this fact with the transmissionmechanism of money. The New Classical approach uses misperceptions theory explanation. TheRBC theorist try to explain the relationship with reverse causation theory.a. According to Keynesian theory, under what conditions money would be effective to havereal effects? If money is effective to have real effects, explain the transmission mechanism thatshows the causation from money to output.b. According to the “misperceptions theory of business cycles”, how and why an increase innominal money supply causes an increase in real output in the short run by affecting thebehavior of producers? Does your answer change if the monetary shock is anticipated orunanticipated? Explain by using the IS-LM-FE and AD-AS Frameworks.c. Explain how reverse causation could occur and what is the explanation from RBC theoristthat money is…Are the outcomes of the Fed's actions precise and predictable? The Fed's actions are _______ because _______. A. precise; the time lags in the adjustment process are predictable B. predictable but not precise; the economy does not always respond in exactly the same way to a given policy C. precise; the ripple effects of its actions are well known D. predictable; it is unusual for other factors to influence the outcome
- The real business cycle theory assumes that money wages are flexible and adjust quickly True FasleConsider the economy represented in the graph. This economy has been hit by a positive demand shock (represented by point B). Before the shock the economy was at equilibrium (represented by point A). The top graph represents the equilibrium in the goods market, the labour market is depicted in the middle graph, and the bottom graph shows the central bank's monetary rule. r, real interest rate Is w, real wages We n, inflation TL1 IIT A ye B B B y₁ IS MR IS' y, output WS PS N, employment PC y, output Select all the CORRECT statements: The Central Bank will wait up to two periods to understand if the shock is permanent or temporary, before adjusting interest rate. If the demand shock is temporary, once the adjustment process guided by the central bank finishes, the economy will be back at the same output (Yt=ye) and interest rate (rt = rs). At point B there is a positive bargaining gap between the WS-PS which puts pressure on prices to increase. The slope of the Phillips curve (PC) does…The economy begins in long-run equilibrium. Then one day, the president appoints a new Fed chair. This new chair is well known for her view that inflation is not a major problem for an economy. a. How would this news affect the price level that people expect to prevail? b. How would this change in the expected price level affect the nominal wage that workers and firms agree to in their new labor contracts? c. How would this change in the nominal wage affect the profitability of producing goods and services at any given price level?
- given the graph and The current target inflation rate in 8 percent. The natural rate of unemployment is 5 percent and Okun's alpha is 8. Suppose that investment spending by business firms increases causing the AD function to shift to the right by 3,000 units. what will the inflation rate be? what will short run real gdp be? what will cyclical unemployment be? what will overall unemployment be? what will the long term inflation rate be?Raise interest rates. Price Level Decrease the money supply. None of the above B LRAS SRAS, SRAS, In the graph above, an economy moves from point A to B after being hit by a supply shock. if the Central Bank wants to keep the unemployment rate at its natural level, what action should it take? Lower interest rates. AD₁ Real GDPAssume that investment, government expenditures, taxes are autonomous.C = 2000 + 0.65* (Y-T)I = 900 – 50iG = 400T = 1500M = 1000P = 2L = 0.50Y-25ia.What is the value of the sensitivity money demand to the level of income?b.What is the value of the nominal supply?c.What expression represents the IS curve?d.What is the equilibrium interest rate, i*?e.What is the equilibrium income, Y*?
- When an economy approaches full employment, why does demand-pull inflation become a problem? Explain.How do you know if the Fed's actions achieve the goal of stable prices? The goal of stable prices is achieved when _______. A. the prices of food, clothing, and shelter are stable B. the PCEPI inflation rate excluding food and energy prices is 2 percent a year C. the general level of prices is changing, but we can accurately predict the rate of change D. the inflation rate is zero percent a year thanks sQUESTION 25 If the marginal propensity to consume is 0.75, the multiplier for taxes and transfer payments is: a. equal to 4. b. equal to 0.75. c. greater than 4. d. less than 4. QUESTION 26 If workers expect a lower rate of inflation, the short-run Phillips curve will: a. shift up. b. remain constant, but there will be a movement down the curve. c. shift down. d. be unaffected.
