LAAS ObB-A OCB-D-A O & A-D-B MA MA Cefer to Exhibit 14-1. What sequence of points shows the short- and long-run consequences of a rise in velocity under monetarist assumptions? AA-E-B
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- 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. How would you expect velocity to typically behave overthe course of the business cycle?Suppose a given country experienced low and stableinflation rates for quite some time, but then inflation picked up and over the past decade had beenrelatively high and quite unpredictable. Explain howthis new inflationary environment would affect thedemand for money according to portfolio theories ofmoney demand. What would happen if the governmentdecided to issue inflation-protected securities?
- 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…The economy begins in longcrun equilibrium. Thenone day, the president appoints a new chair of theFederal Reserve. 11\is new chainnan is well known forher view that inflation is not a major problcn1 for aneconomy.a. How would this news affect the price level thatpeople would expect to prevail?b. How would this change in the expected pricelevel affect the nonlinal wage that workers andfmn.s agree to in their new labor contracts?c. How would this change in the nonlinal wageaffect the profitability of producing goods andservia,s at any given price level?d. How docs this change in profitability affect theshort-run aggregate-supply curve?e. ff aggregate demand is held constant, how docsthis sllift in the aggregate-supply curve affect theprice level and the quantity of output produced?f. Do you think this Fed chainnan was a goodappointment?Money demand is likely to increase the most during which part of the business cycle? A. recession B. trough Ос. рeak O D. contraction O E. recovery
- 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?WHAT THE FISCAL AND MONETAARY POLICIES DID THE USA GOVERNMENT PURSUE TO COMBAT THR FINANCIAL CRISES ON 2008 AND PANDEMIC CRISES IN 2020? AND HOW WOULD YOU MODEL THE EFFECTS OF THESE POLICIES IN IS\LM AND AD\ AS MODELS?[S1] Treasury bond buybacks may indicatethat there is a relaxed monetary policy. Abusiness entity would most likely expecthigher aggregate demand and higherinflation. [S2] Green policies against the useof plastic will be,implemented. All entities willbe negativelyaffected by this. A. Only S1 is true.B. Only S2 is true.C. Both are true.D. Both are false.
- Everything else held constant when financial frictions increase, the real cost of borrowing. so that planned investment spending at any given inflation rate. Select one: Oa. increases; falls O b. decreases: falls, Oc. decreases; rises O d.increases: risesi 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.Suppose that a borrower and a lender agree on thenominal interest rate to be paid on a loan. Theninflation turns out to be higher than they bothexpected.a. Is the real interest rate on this loan higher or lowerthan expected?b. Does the lender gain or lose from thisunexpectedly high inflation? Does the borrowergain or lose?c. Inflation during the 1970s was much higher thanmost people had expected when the decade began.How did this unexpectedly high inflation affecthomeowners who obtained fixed-rate mortgagesduring the 1960s? How did it affect the banks thatlent the money