Note:hand written solution should not be used. 2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP,Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and Yp.A. Is this SR equilibrium a recessionary gap or an inflationary gap?XB. Assume the Fed decides to act. How wouldyou suggest they use or alter each of thefollowing?- Open Mkt Operations- Required Reserve Ratio- Discount/Federal Funds RatesC. Explain carefully how the changes in part B eventually alter AD. Explain each step.

The aggregate demand in the economy shows the total spending done by various sectors of the economy…

2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP, Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and YP. A. Is this SR equilibrium a recessionary gap or an inflationary gap? B. Assume the Fed decides to act. How would you suggest they use or alter each of the following? - Open Mkt Operations - Required Reserve Ratio - Discount/Federal Funds Rates

2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP, Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and YP. A. Is this SR equilibrium a recessionary gap or an inflationary gap? B. Assume the Fed decides to act. How would you suggest they use or alter each of the following? - Open Mkt Operations - Required Reserve Ratio - Discount/Federal Funds Rates

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 3SQP

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2. The graph below shows the AD-AS model in short-run equilibrium at price level Po and level of real GDP at Yo. Label the following: AD, SRAS, LRAS, Po and Yo. P Y A. Is this SR equilibrium a recessionary gap or an inflationary gap? Why is the undesirable? B. Assume Congress and the President decide to act. How would you suggest they alter each of the following (1,↓↓, or no change)? - Taxes - Transfer Payments -Government Spending C. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. D. As the economy moves from Yo to Yp, what happens to the following (1,↓, or no change)? - Real GDP - the unemployment rate - The price level - the rate of inflation
2. The graph below shows the AD-AS model in short-run equilibrium at a price level, Po, and a level of real GDP, Yo. Label the following: both axes, AD, SRAS, LRAS, Po, Yo, and Yp. A. Is this SR equilibrium a recessionary gap or an inflationary gap? * C. Explain carefully how the changes in part B eventually alter AD. Explain each step. B. Assume the Fed decides to act. How would you suggest they use or alter each of the following? - Open Mkt Operations - Required Reserve Ratio - Discount/Federal Funds Rates D. Show the effects of these changes in the space above. Assume this intervention brings the economy back to potential GDP. E. As the economy moves from Yo to Yê, what happens to the following measures of the aggregate economy? - the unemployment rate - the rate of inflation - Real GDP - The price level
Illustrate each of the following situations with a graphshowing AS and AD curves, and explain what happensto the equilibrium values of the price level and aggregateoutput:a. A decrease in G with the money supply held constant bythe Fedb. A decrease in the price of oil with no change ingovernment spendingc. An increase in Z with no change in governmentspendingd. An increase in the price of oil and a decrease in G
When the economy is experiencing a recession, why would aneoclassical e conomist be unlikely toargue for aggressive policy to stimulate aggregate demandand return the economy to full employment? Explain your answer.
Using AS and AD curves to illustrate, describe the effectsof the following events on the price level and on equilibriumGDP in the long run assuming that input prices fullyadjust to output prices after some lag:a. An increase occurs in the money supply above potentialGDPb. GDP is above potential GDP, and a decrease in governmentspending and in the money supply occursc. Starting with the economy at potential GDP, a war inthe Middle East pushes up energy prices temporarily.The Fed expands the money supply to accommodate theinflation.
01 10 CO xp 381 In the figure, the economy is at an equilibrium with real GDP of $20 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts, because 0 0 0 0 0 A. aggregate demand; leftward; the money wage rate rises B. aggregate supply: rightward; the money wage rate falls OC. potential GDP; leftward; the money wage rate falls D. aggregate demand; rightward; the money wage rate falls OE. aggregate supply; leftward; the money wage rate rises 130- 120- 110- 100- Price level (GDP price Index, 2012 = 100) Potential GDP 90- AS AD 19.0 19.5 20.0 20.5 21.0 21.5 22.0 Real GDP (trillions of 2012 dollars) ✓ ✓ 5
8a. Assume that an economy is at equilibrium at its potential GDP at $10 trillion and aprice level of 100. What would be the short-run impact of a significant fall in consumer confidence about the future? Provide an AD/AS model to support your answer. b. What policy would you recommend to the chairperson of the Federal Reserve? Be specific. Show the effect of this policy on your graph part a. c. What are the major goals of the Fed's monetary policy?
Figure 16-6 Price level 104 100 LRAS, LRAS₂ SRAS, SRAS₂ AD₂ Refer to Figure 16-6. In the dynamic model of AD-AS in the figure above, if the economy is at 0 $10 11 11.3 Real GDP point A in year 1 and is expected to go to point B in year 2, Congress and the president would most likely O increase the money supply and decrease the interest rate. O increase taxes. ● increase government spending. O increase oil prices. Oraise interest rates.
Owing to the global rise of fertilizer prices in 2022 (in turn caused by the Russian invasion of Ukraine), the country experienced a shortage in some agricultural commodities. Using the AS-AD model, which of the following is an anticipated effect of this phenomenon? O a. Aggregate demand will rise in the short run. b. Aggregate demand will be higher than initial level in the long run. O C. Prices will quickly rise in the short run. O d. Prices will fall even below the pre-supply shock level in the long run.
3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.
At the macroeconomic equilibrium, the economy has _______ gap, so to return to full employment _________. A. an inflationary; the money wage rate rises and aggregate supply increases B. a recessionary; the money wage rate falls and aggregate supply increases C. an inflationary; the money wage rate rises and aggregate supply decreases D. a recessionary; the money wage rate rises and aggregate supply decreases
Explain the effect, if any, that each of the following occurrencesshould have on the aggregate demand curve.a. The Fed lowers the discount rate.b. The price level decreases.c. The federal government increases federal income tax rates inan effort to reduce the federal deficit.d. Pessimistic firms decrease investment spending.e. The inflation rate falls by 3 percent.f. The federal government increases purchases to stimulatethe economy.