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- Which of the following is true in the dynamic AS-AD model? Group of answer choices The dynamic aggregate demand curve is downward sloping because the central bank follows the Taylor principle. An increase in the natural level of output increases the long-run inflation rate. To control inflation, the central bank should increase the nominal interest rate by less than one for one in response to an increase in the inflation rate. The monetary policy rule determines the slope of the dynamic aggregate supply curve.Two potential causes of inflation above target in the AD-AS model: Demand-pull inflation: This occurs when aggregate demand (AD) increases more than the long-run aggregate supply (LRAS). In the AD-AS diagram, this would be represented by a rightward shift of the AD curve. The result is a higher price level and real GDP beyond the long-run macroeconomic equilibrium level. Cost-push inflation: This occurs when the short-run aggregate supply (SRAS) curve shifts to the left due to increased production costs, such as rising wages or input prices. In the AD-AS diagram, this would be represented by a leftward shift of the SRAS curve. The result is a higher price level and a reduction in real GDP. how do i graph this information in an ad-as diagramWhich of the following is true the dynamic AS-AD model? The dynamic aggregate demand curve is downward sloping because the central bank follows the Taylor principle. An increase in the natural level of output increases the long-run inflation rate. To control inflation, the central bank should increase the nominal interest rate by less than one for one in response to an increase in the inflation rate. The monetary policy rule determines the slope of the dynamic aggregate supply curve.
- Consider the AS/AD model. The AS curve is: Ỹ, = a – bm(r, – T) and the AD curve is: T; = T;-1 + UY, +ō. t where t is inflation and Y is short-run output. The subscript t indexes time. ū = 0.01, ō = 0.02, ā = 0.04, b = 0.05, and m = 0.04 are fixed strictly positive parameters. Assume the inflation target T is 0.02 (or 2%). Calculate T at the steady state. (If you answer is 3%, do not put the percentage sign enter 3 or 0.03).Consider the AD-AS model: Y = Y* ay (π = π*) + ED ㅠ π = π² + 08 (Y-Y*) + €s Suppose the parameter values are a = = 0.02 0.5, y = 2, p = 0.5, B = 2 with inflation target * and natural output normalized to Y* = 1. Suppose the economy begins in an initial long run equilibrium.Consider the AS/AD model. The AS curve is: Y, = a – bm(r, - 7) and the AD curve is: Thy = T-1 + DỸ, +ō. where r is inflation and Y is short-run output. The subscript t indexes time. ī = 0.01,0 = 0.02, ā = 0.04, b = 0.05, and m = 0.04 are fixed strictly positive parameters. Assume the inflation target is 0.02 (or 2%). Calculate Y at the steady state. (If you answer is 3%, do not put the percentage sign enter 3 or 0.03).
- Cost-push inflation is depicted as a rightward shift of the aggregate demand curve along an upsloping aggregate supply curve. True or False?Consider the AD-AS model Y = Y* — ay(π − π* ) + €D - π = π² + OB(Y−Y*) + €s Suppose the parameter values are a = 0.5, y = 2, p = 0.5, ß = 1 with inflation target * = 0.02 and natural output normalized to Y* = 1. = Suppose the economy begins in an initial long run equilibrium and there is then a temporary demand shock Ep = -0.05. In the short run, immediately following this shock, output and inflation are given by: Y = 1.025, π = -0.005 Y = 0.975, π = +0.005 Y = 1.025, π = +0.005 Y = 0.966, π = -0.003The term "Long-Run", used in the context of the IS-MP-AS-AD model refers to the amount of time such that ... Group of answer choices monetary policy plays no role in the determination of aggregate output. only transitory deviations of labour productivity from its trend matters for the determination of the natural level of output. monetary policy has had enough time to respond to unanticipated events that buffer the economy and aggregate output returns to its natural level.. expectations about inflation have been fully incorporated into the wage-negotiation process.
- Which of the macroeconomic policies listed below is contractionary and will help reduce the rate of inflation? Group of answer choices A balanced budget increase in both government spending and autonomous taxes. Open market purchases by the central bank. Higher transfer payments to the general population to help offset higher prices. Promotion of an appreciated domestic currency in foreign exchange markets.Consider a standard AD-AS model. The economy is affected by the following sequence of events. In period 1 there is a shock to the economy that is temporary. In period 2, the shock ends. But having observed an inflation outcome different to the inflation target, inflation expectations change from the inflation target to a value exactly equal to the observed inflation in period 1 (that is, expectations are not `anchored’). A temporary positive demand shock would lead to output above potential in period 1, but below potential in period 2. Answer true or false. Please briefly explain your answer.Which of the following would cause the dynamic DAD curve to shift in (back)? A) a decrease in consumer confidence. B) a decrease in the inflation rate. C) an increase in consumer wealth. D) an increase in the short-run aggregate supply (SRAS) curve.