model with a single-time-period lag on onsumption function, as described below, is initially in equilibrium and vel of I, is given at 500, Y, = C, + I, C, = 750 + 0.5Y s then increased to 650. Use difference equation analysis to find the va Y, in the fourth time period after this disturbance to the system. Wil a be within 1% of its new equilibrium level?
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- Consider a Keynesian business cycle theory that combines the IS-LM model with the assumption that investors become infected with optimism. Does the theory explain observed cyclical behavior of each of the following variables? Еmployrment O A. is procydlical in the data, but is countercydlical in the model. Hence the model does not match this business cycle fact. O B. is countercyclical in the data, but is procyclical in the model. Hence the model does not match this business cycle fact. OC. is countercyclical in the data, and is countercyclical in the model. Hence the model matches this business cycle fact. OD. is procyclical in the data, and is procyclical in the model. Hence the model matches this business cycle fact. Average labor productivity O A. is procyclical in the data, but is countercyclical in the model. Hence the model does not match this business cycle fact. OB. is countercyclical in the data, but is procyclical in the model. Hence the model does not match this business…Suppose, initially the Australian economy is atfull employment(in other words the economy is atthe potentialGDP). Using AD-AS model, explain how would each of the following events aectthe economy both in theimmediate and in the long term.a) A slowdown in China’s economic growth due to the sub-prime crisis in the US.b) Union wage settlements push the wage rate up.c) An increase in consumer confidence.1 1A) Using the static AD/AS model to explain how the job keeper (wage subsidy) policy worked to sustain the economy even though unemployment rate in Australia had increased during Covid-19 period? 1B) justify in detail the difference between U shaped recoveries and V shaped recoveries?
- Discuss in detail the limitations of the IS-LM model. Why is it unrealistic for todays economies1. Consider the following classical macroeconomic model. Y = C(Y –T) + I(r -x)+G 0 0,1, 0 (4) N = N° - NS Y = F(N,K) F, > 0 (5) Y, C, T, ! , G, r, 1 M, P N, are respectively output, consumption, taxes, investment, government consumption, the nominal interest rate, the expected inflation rate, the money supply the price level, Y,P,N,r,W and labor. The endogenous variables are 1 is predetermined, and the policy variables G, and M, and the capital stock, K are exogenous. а) Interpret the equations. b) What are the effects of an adverse supply shock, described by a fall in the capital stock on the price level, the real wage, employment, and output. c) Why do fiscal policy and monetary policy not affect output or employment? d) What are the effects of a fiscal and a monetary expansion on the price level and interest rate?1. a) Construct the AD-AS model showing AD, short run AS and long run AS intersecting at the potential output level and label this intersection Eo. Assume that this represents the Philippine economy before the pandemic. b) From the initial condition, illustrate in your graph how the pandemic affected the economy in the short run (was there a demand shock or supply shock or both)? c) Explain the reason for the shift in the curve or curves? d) Explain how the changes in the AD-AS model above have affected equilibrium real GDP, unemployment, and price level.
- 3. Assume that production fun ction takes the form Y = (Ko.5) + L'as)e, Show if %3D this production function obeys neoclassical assumptions. 4. Lets assume that the time derivative of a continuous variable Xa is defined as X = M+ N where, M. and N are also contimuous variables defined by follow ing fun ctions: N = ek+ & M, = et and k is a constant Find the grow th rate of X, at the steadystate in terms of k.1. Consider the following simple Keynesian model, (i) Rewrite the model into matrix form with Y, C and I as endogenous variables and Go and i as exogenous variables. (The coefficient matrix must be a 3 by 3 matrix.) Y=C+I+Go C = 200+ 0.8Y I= 1000-2000 (ii) Compute the equilibria Y*, C* and I* as functions of Go and i using Cramer's rule. 8Y* (iii) Find and di ƏY* ƏGo (iv) Give an economic interpretation of national income? ƏY* " ƏGo what should the government do if it wants to raiseConsider a modified aggregate supply function which takes account for the emergence of random business cycle shocks (ce) with Ele] - O in the sense that Ye - R - R ++ 6 The loss function is the same as in exercise 1: L-(n - k)* +(m)? Notation: €: random shock; E[e,]: expected value of e; b: constant parameter, all other variables see Exercise 1. Having considered the scenario above complete the following tasks: a) Derive the central bank's preferred inflation rate and explain.
- 6.1.What is an AD-AS model and what does such a model as per the givendiagram essentially focus on?6.2.Discuss the diagram in detail by first explaining what leads to step Step 1(representing a shift in curves on the diagram) and indicating what occursto cause shifts in some of the curves. Then discuss Step 2 (whichrepresents other macroeconomic changes) and indicate what happens toother variables when there are shifts in some of the curves as per Step 1. 6.3.What, in general, do the points of intersection between the AS and AS2curves and the AD curve show?6.4.When the LAS curve moves to the right to LRAS2, what exactly do thepoints of intersection between the AS and AS curves and the AD1 curve,indicated as point 1 and point 2, reflect on the diagram?ons/Interface/acellus_engine.html?ClassID=184970027 MEX a Amazon.com: SMil... Barclay Hannah Paine3rd... of Costco Card A. similar in nature B. exactly the same C. completely irreconcilable Capital One Kieran Which of the following represent both the Keynesian and Classical LRAS Curves? ht© 2003-2023 International Academy of Science. All Rights Reserved. Rocket Mortgage Reward Credit Car... Dashboard |Assume that an economy operates according to the sticky-wage model. The nominal wagewas set to make labor supply and labor demand equal when the expected price levelequaled 120 (as measured by the consumer price index).a. Use a graph of the labor market to illustrate what happens to the quantity oflabor employed if the actual price level over the time period when wages arestuck equals 110.b. Use a graph of the production function to illustrate how the quantity of outputproduced changes if the actual price level equals 110 when the expected pricelevel is 120.c. Given the unexpectedly low price level, will this economy be operating above,below, or at the natural rate?