In the graph, demonstrate the short-run effect of an increase in the growth rate of the money supply, assuming all else remains equal. What happens in the long run? LRAS O As expectations adjust to the increase, all curves shift back to their original locations. The SRAS curve shifts to the left, and the inflation rate SRAS increases, with no change in the growth rate. O The AD curve shifts to the right, and both the real growth rate and inflation rate increase. O The LRAS curve shifts to the right, and the real growth rate increases, with no change in the inflation rate. AD Real GDP growth rate Inflation rate (x)

In the graph, demonstrate the short-run effect of an increase in the growth rate of the money supply, assuming all else remains equal. What happens in the long run? LRAS O As expectations adjust to the increase, all curves shift back to their original locations. The SRAS curve shifts to the left, and the inflation rate SRAS increases, with no change in the growth rate. O The AD curve shifts to the right, and both the real growth rate and inflation rate increase. O The LRAS curve shifts to the right, and the real growth rate increases, with no change in the inflation rate. AD Real GDP growth rate Inflation rate (x)

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter34: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 4CQQ

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Similar questions

Which of the following are examples of monetary policy that decrease aggregate demand? O A. a decrease in the quantity of money and an increase in interest rates O B. a decrease in taxes and a decrease in interest rates O C. an increase in transfer payments and an increase in interest rates O D. an increase in the quantity of money and a decrease in interest rates 身

Which of the following would cause the AD curve to shift to the left? Select one: O a. A decrease in the rate of inflation O b. A decrease in the real rate of interest O C An increase in government purchases O d. None of these O e. A decision by the Fed to decrease the nominal interest rate Check
The slope of the ADTT curve is determined by: O a. The monetary policy of targets and instruments of the central bank O b. All of the above O c. The expenditure multiplier O d. The changes in and aggregate expenditure when interest rates change
Refer to the accompanying figure. LRAS Inflation a A 0, y' Output O O An economy is currently in long-run equilibrium at point B, at an inflation rate of m, which is too high to sustain economic growth. If an anti-inflationary policy is enacted, the economy will be in short-run equilibrium at point creating gap. O SRAS O SRAS AD' AD A; an expansionary A; a recessionary D; a recessionary D; an expansionary
Suppose an economy is in long-run equilibrium.a. Use the model of aggregate demand andaggregate supply to illustrate the initialequilibrium (call it point A). Be sure to includeboth short-run aggregate supply and long-runaggregate supply.b. The central bank raises the money supply by5 percent. Use your diagram to show whathappens to output and the price level as theeconomy moves from the initial equilibrium to thenew short-run equilibrium (call it point B).c. Now show the new long-run equilibrium (call itpoint C). What causes the economy to move frompoint B to point C?d. According to the sticky-wage theory of aggregatesupply, how do nominal wages at point Acompare with nominal wages at point B? How donominal wages at point A compare with nominalwages at point C?e. According to the sticky-wage theory of aggregatesupply, how do real wages at point A comparewith real wages at point B? How do real wages atpoint A compare with real wages at point C?f. Judging by the impact of the money…
Question 3 When placed in the AD/AS framework, the simple quantity theory of money requires O A horizontal AD curve. O A vertical AS curve. O A horizontal AS curve. O A vertical AD curve. Question 4 If decline in interest rates doesn't lead to increased investment then, O Unemployment will be the same. Real GDP will be the same as before. O Allof the above O AD curve will remain unchanged.
In the graph, demonstrate the short-run effect of an increase in the growth rate of the money supply, assuming all else remains equal. What happens in the long run? LRAS O As expectations adjust to the increase, all curves shift back to their original locations. SRAS The SRAS curve shifts to the left, and the inflation rate increases, with no change in the growth rate. The AD curve shifts to the right, and both the real growth rate and inflation rate increase. The LRAS curve shifts to the right, and the real growth rate increases, with no change in the inflation rate. AD Real GDP growth rate Inflation rate (T)
Suppose the current administration decides to decreasegovernment expenditures as a means of cutting theexisting government budget deficit.a. Using a graph of aggregate demand and supply, showthe effects of such a decision on the economy in theshort run. Describe the effects on inflation and output.b. What will be the effect on the real interest rate, theinflation rate, and the output level if the FederalReserve decides to stabilize the inflation rate?
Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…
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.
Suppose two countries have identical aggregate demandcurves and potential levels of output, and g is the samein both countries. Assume that in 2019, both countriesare hit with the same negative supply shock. Given thetable of values below for inflation in each country, whatcan you say, if anything, about the credibility of eachcountry’s central bank? Explain your answer.Country A Country B2018 3.0% 3.0%2019 3.8% 5.5%2020 3.5% 5.0%2021 3.2% 4.3%2022 3.0% 3.8%
i neeed it in word form.. not handwrittten Explain, with the aid of three separate IS-LM-FE diagrams, how a decrease in government purchases will affect real output, real interest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain the intuition of your answer with reference to the AD-AS framework.