Indicate whether the following statement is true, false, oruncertain and explain your answer using words, graphs andequations as appropriate.(i)Decreasing reserves is a type of expansionarymonetary policy.(ii) If only unanticipated changes in the money supplyaffect real GDP, the public has rational expectations,and everyone has the same information about the stateof the economy, then monetary policy cannot be usedto systematically stabilize output.Along a SRAS curve, if the level of output is less thanthe natural level of output, then the price level is greaterthan the expected price level.(ii)

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Answered: Indicate whether the following…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the economy is in recession and asymmetric information problems increase, using a graph of aggregate demand and supply EXPLAIN how these problems affect the ability of monetary policymakers to stimulate the economy. NOTE THAT : EXPLAIN İN DETAİL PLEASE
In the model SIM of chapter 3 of the book of Godley, Wynne, and Marc Lavoie. 2012. Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. 2nd ed. 2012 edition., starting from a stationary state simulate the effect of an increase in government expenditure under four variations of the model: a model where expected disposable income is always constant and equal to 20: Y De = 20 Discuss the trajectory of output from the original stationary state to the new one.
Q2: Using the three-equation model of an inflation targeting central bank and a banking system, explain what factors determine the mark-up of the lending rate over the policy rate. Does the introduction of banks into the model change the way in which monetary policy is conducted in the 3-equation model? Use diagrams to illustrate how the central bank responds to an aggregate demand shock.
Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank’s action on the interest cash rate ripple through the economy and lead to the target policy goal. Three connected diagrams must be used: - (1) money supply and demand - (2) investment demand schedule - (3) AS/AD diagram. Interest rates is the variable that connects the first and second diagram.
Reflections on a classic: A Monetary History of the United States, 1867 to 1960, by Milton Friedman and Anna Schwartz, is a classic study of monetary policy and was published in 1963. Read the interview with Anna Schwartz available at www.minneapolisfed.org/pubs/region/93-09/int939.cfm, and explain what you think was the main contribution of this book. (Other interesting interviews with famous macroeconomists are gathered at http://minneapolisfed.org /pubs/region.)
2) b) there are a number of objectives that the monetary policy intends to achieve however, not all objectives can be achieved simultaneously. Describe three cnflicts that are normally observed.
Draw and properly label three graphs of money supply-money demand (in one graph), investment demand, and AD-AS (6%). Then, referring to the graphs in your explanation, use one of the three traditional monetary tools to explain how the monetary transmission mechanism works to close recessionary and also inflationary gaps. (9%)
“Autonomous monetary policy is more effective at changing output when lambda is higher.” Is this statement true, false, or uncertain? Explain your answer.
Provide brief intuitive answers to the following questions. 1. What are the main empirical and theoretical contributions of the Mankiw, Romer and Weil's paper? Define one of the main empirical challenges they faced in their analysis? 2. Explain what central banks can do when they encounter a liquidity trap, and cannot use conventional monetary policy. 3. Explain how the real business cycle model can explain why the price level is countercyclical at some times, and uncorrelated with output at other times.
Question Two As an investment advisor, you have been requested to advise a client on whether he should invest his ten million dollars in Zambia or in South Africa. What key theory would you apply to advise the client on the short term and medium term implications of investing locally and abroad? The Government of Zambia has decided to pursue a dual mandate of price stability and economic growth in the conduct of monetary policy. Advise on the possibility of the country achieving both price stability and economic activity stability in the case of a temporary supply shock. Ensure to demonstrate this with the aid of the Aggregate Demand and Aggregate supply framework.
Given the supply and demand shocks caused by the pandemic, expansionary monetary policy is called for. What can central banks do given the zero-interest rate lower bound (alternatives to standard policy actions) and are their actions effective? Explain why or why not.
Suppose the economy has just entered a downturn due to a decrease in investment spending. While of the following actions could a central bank take to successfully counteract the downturn? a) Increase capital investment spending on the part of government agencies. b) Issue treasury bills in order to lower the interest rate. c) Buy back treasury bills in order to lower the interest rate. d) Buy back treasury bills in order to raise the interest rate. e) Lower the tax rate on real estate and capital gains assets

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