Examine the effectiveness of monetary policy (expansionary and contractionary) on Price and output in the short run and long run in AD-AS Model. Add relevant graphs to complete the answe
Q: Explain the difference between monetary loosening and monetary tightening. According to the…
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Q: The focus of monetary policy nowadays is by using interest rate as an indicator. True False
A: Monetary policy is used by the central bank to regulate the money supply in the economy.
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Q: a) Consider an AD-AS model with Static Expectations. Show how changes in monetary policy generate…
A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
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A: Answer-
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Q: AD, AD, AS Real GDP AD, \AD, AS Real GDP Price level Price level
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- Using the dynamic AD-AS analysis, show the effect of contractionary monetary policy.Using the AD-AS model, draw a graph and explain the effect of the implementation of a restrictive monetary policy on the equilibrium price level and the equilibrium level of output.The main argument against monetary policy is that it affects only nominal variables, not real variables. Explain this argument using the method below. I. Explain and show on a graph the short-run and long-run equilibrium changes in the AD/AS model from expansionary monetary policy. How does this support an anti-monetary policy stance? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
- QUESTION 2: WORD LIMIT – MAXIMUM 500 WORDS Using the AD/AS model, analsye how monetary policy may be used alleviate inflationary pressure. In your answer, comment on the UK’s monetary policy framework. Use wellannotated AD/AS diagrams and comment on monetary policies relationship with fiscal policySuppose pessimism about the future makes household consumption plummet. How would this affect the AD-AS model in the short-run, and what monetary policy could be implemented to stabilize this fluctuation? Illistrate on a diagram if possible.Elaborate on the impact of a central bank's reduction in interest rates using the AD-AS model.
- Using the AD-AS model, discuss the money neutrality in the short-run and in thelong-run.Consider a standard AD-AS model. If the central bank responds relatively aggressively to inflation being below target, temporary supply shocks have relatively little effect on output. True/False. Remember to include your explanation.Assume you are a member of the Federal Reserve, and you are adhering to the dual mandate. The economy reflects the following: 2018 CPI: 115 2019 CPI: 121.9 Potential GDP: $20 trillion 2019 Real GDP: $21 trillion Natural rate of unemployment: 4.00% 2019 unemployment rate: 3.50% Sketch a graph of the AD-AS Model. Be Sure to label all parts of the graph. Notate what type of gap you have and be sure to reflect it in your graph. What monetary policy tools can be used to fix the gap identified in part A? Assume you have adopted the Taylor Rule. Calculate the targeted federal funds rate if the equilibrium real federal funds rate and target rate of inflation is both 2%. Graphical demonstrate the effects your recommended change of the Federal Funds Rate has on the reserves market, the money market, and the loanable funds market. Note that you should have three separate graphs, one for each market, but you do not have to worry about finding the quantity of reserves, money, or…
- State the main features of the monetary model. Use the model to analyse the impact of an expansionary monetary policy.By using appropriate diagrams, discuss the role of the monetary and fiscal policies in the New Keynesian sticky price model.Consider the AD-AS model in the following picture. If the original level of aggregate demand is Ef, what will be the effect of an expansionary monetary policy that shifts aggregate demand from ADf to ADI? Price Pf Pr Fig11a Er C. Yr Real GDP LRAS ADr Ef I don't know. SRAS Ei ADf Yf Yi a. stagflation b. inflation and unemployment ADi d. inflation, but little employment