According to the AD-AS model, what is more challenging for a central bank: to use active exogenous monetary policy to offset a financial shock, or to use active exogenous monetary policy to offset an exogenous increase in prices due to an oil price shock? Use the model to discuss each case separately. Can the central bank avoid a drop in output and a variation in the price level?

Show on a graph of the AS-AD model of the economy how different fiscal and monetary policies impact on the economy

In the AS/AD model, higher interest rates are produced by: Multiple Choice O O O O a steady-as-you-go monetary policy. a contractionary monetary policy. an expansionary monetary policy. an activist monetary policy.

Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility.Using a graph of aggregate demand and supply explain (a long explanation) how the credibility of each country’s central bank affect economic outcomes, if both countries are hit with the same b) negative temporary aggregate supply shock?

What happens in the AD-AS model when the Federal Reserve buys government securities?

Elaborate on the impact of a central bank's reduction in interest rates using the AD-AS model.

According to the rational expectations model, how would an announcement of expansionary monetary policy affect aggregate output? a) It would decrease aggregate output. b) It would increase aggregate output in both the short run and the long run. c) It would increase aggregate output in the short run. d) It would have no effect on aggregate output.

For each of the following situations, describe how (if at all) the IS, MP, and AD curves are affected. A decrease in financial frictions An increase in taxes and an autonomous easing of monetary policy An increase in the current inflation rate A decrease in autonomous consumption Firms become more optimistic about the future of the economy. The new Bank of Canada governor begins to care more about fighting inflation.

Complete the following table to compare the results of an unanticipated expansionary policy to those of an anticipated expansionary policy in the short run and long run. Determine whether, in the short run, the level of output increases, decreases, or remains unchanged relative to the potential output level when the expansionary policy is anticipated versus unanticipated. Additionally, determine whether, in the long run, the actual price level is above, below, or the same as initial expectations under both scenarios, and, again, determine whether the level of output increases, decreases, or remains unchanged.   Anticipated Expansionary Policy Unanticipated Expansionary Policy Short-Run Change in Output Decrease/Increase* Decrease/Increase/No Change* Long-Run Change in Price Level Same as Initial expectation/Higher then initial expectations/ lower then initial expectations* (same options as box on the left) ** Long-Run Change in Output       Decrease/Increase/No change*…

Suppose that a given economy, in which the level of production (Y) is not at the natural level (Yn), an economy in which Y#Yn. 1) Using the AS/AD model, give an explanation of what will happen in the future and suggest a fiscal and/or a monetary policy to adjust the output and further analyse the effect of the suggested policy on employment and price level. 2) Illustrate your answer in part 1) by presenting and analysing data from the UK by identifying two occasions since 1950 (each covering a span of 2-5 years), where such an adjustment process occurred.