Compare the effects of a negative demand shock, for example, a decline in autonomous investment, in the Kesnesian and Classical models show the effects of this shock on the level of real income, employment, the price level and the rate of interest in both models Answer this question only by using diagrams.

Please explian these concepts of Ricardian Model in your own words (include what formulas/rules apply for each): 1. autarky prices 2. prices where trade occurs 3. Real wages 4. What are other parts of the model besides the three listed above

Consider a one-sided search model of unemployment we developed in class. In class discussion we never mentioned how unemployment insurance benefit, b, is financed. For this question, you are going to incorporate it to the model. Let's assume that in order to finance the unemployment insurance benefit, b, the government imposes lump-sum tax, T, on each employed worker. Assuming that the economy is in a long-run steady-state equilibrium, the total amount that needs to be paid out to unemployed workers is bU, where as usual, U repre- sents the fraction of unemployed. The total amount of tax collected (which we can interpret as an unemployment insurance premium) from employed workers is (1U)T. The government runs balanced budget, hence, bU = (1 – U)T. In this new setting, please show the effect of an increase in unemployment in- surance benefits, b, on reservation wage, w*, and on the long-run unemployment rate, U. Using graphs clearly demonstrate how the behavior of this model is…

Detail the macroeconomic policies that might be used to tackle the effects of a severe negative supply shock and explain the dilemmas faced.

Question: Consider the IS-LM model derived. Suppose the economy of Economica is initially at the general equilibrium. Suppose further that the government considers the increase of the effective tax rate on capital and hires you as a consultant. a. Explain and show graphically how an increase in the effective tax rate on capital would affect the labor, goods, or the asset market. b. Explain and show graphically how an increase in the effective tax rate on capital would affect the short-run equilibrium. c. Explain and show graphically how an increase in the effective tax rate on capital would affect the long-run equilibrium.

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II. Consider the following IS-LM model:? = 200 + 0.25??? = 150 + 0.25? − 1,000?? = 250? = 200(?/?)? = 2? − 8,000??/? = 1,600a. Derive the IS relation. (Hint: You want an equation with ? on the left side and everythingelse on the right.)b. Derive the LM relation. (Hint: It will be convenient for later use to rewrite this equationwith ? on the left side and everything else on the right.)c. Solve for equilibrium real output. (Hint: Substitute the expression for the interest rategiven by the LM equation into the IS equation and solve for output.)d. Solve for the equilibrium interest rate. (Hint: Substitute the value you obtained for ? inpart (c) into either the IS or LM equation and solve for ?.)e. Solve for the equilibrium values of ? and ? and verify the value you obtained for ? byadding ?, ?, and ?.f. Now suppose that the money supply increases to ?/? = 1,840. Solve for ?, ?, ?, and ?,and describe in words the effects of an expansionary monetary policy.g. Set ?/? equal to its initial…

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Consider the Ramsey Model of the macroeconomy. Explain using a phase diagram how an economy starting from any point in phase space reaches the unique steady state solution. Now suppose once the steady state is reached that there is an unexpected permanent fall in government spending. Explain, using a phase diagram, how the c = 0 and k = 0 curves are affected and how the economy moves to a new steady state. How are interest rates affected during the transition to the new steady state? Explain your answer.

Q1: Consider the IS-LM model. Suppose the economy of Economica is initially at the general equilibrium. This year, the weather in Economica is extremely good.   a. Explain and show graphically how a good weather shock affects the labor, goods, or the asset market. b. Explain and show graphically how a good weather shock affects the short-run equilibrium. c. Explain and show graphically how a good weather shock affects the general (long-run) equilibrium.