ity Prefer

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.

Suppose that the following equations represent an entire economy. What size output shock will send the economy into a liquidity trap? t = y0.5 (r - 3%) r = 2% + (πt - 2%) + 2.9t πt = 2% + t

The last personal savings rate recorded by the Federal Reserve database was 2.4%. Assume your average tax rate is 35%. The Federal Government recently spent $1.2T on “infrastructure”. Assuming this stands, answer the following question.  1. How much disposable income would the third iteration of this spending generate?  1.1A. What is the estimated increase in aggregate demand as a result of this bill assuming no tax  increase?

Question 1 Discuss, by means of appropriate diagrams and explanation, the Keynesian liquidity trap. Depict both the LM curve and aggregate demand (AD) curve, and explain their appearance, in the case of the liquidity trap. If you were to advise the policymakers on which action to take, what would be your advice?

Which of the following is true the dynamic AS-AD model? The dynamic aggregate demand curve is downward sloping because the central bank follows the Taylor principle. An increase in the natural level of output increases the long-run inflation rate. To control inflation, the central bank should increase the nominal interest rate by less than one for one in response to an increase in the inflation rate. The monetary policy rule determines the slope of the dynamic aggregate supply curve.

If the FED decides to increase the quantity of money in the economy, the LM curve will shift right. True or False

What is the reason behind why the SRAS curve is upward sloping?     There are few unutilised resources     Higher price level means higher nominal wages     Higher price level means higher real wages     Lower price level will increase profit     Nominal wages and input costs are sticky in the short run

With the economy in a recession due to inadequate aggregate demand, the government increased its spending by $1,200. Suppose the central bank takes no action for the time being, and the marginal propensity to consume is 2/3, how large will the increase of aggregate demand approximately?