The following set of equations describe an economy: C = 15,000+0.5(r-T)-50,000 rl^P = 10,000 - 25,000 г G = 8,000 NX = 2,600 T = 8,200 Y^* = 46,800 a. Find a numerical equation relating planned aggregate expenditure to output and to the real interest rate. PAE = b. At what value should the Fed set the real interest rate to eliminate any output gap? (Hint Set output Y equal to the value of potentia output given above in the equation you found in part a. Then solve for the real interest rate that also sets planned aggregate expenditure equal to potential output.) Instructions: Enter your response as a whole number. Real rate of interest:

QUESTION 2. Consider the following equations: MP Curve: r = 1 + 0.5 * TT IS Curve: Y = 1400 300r, Where r is the real interest rate in percentage points, Y is the real GDP in billions, and it is the inflation rate in percentage points. a) Using the MP and IS curves equations, obtain the Aggregate Demand equation. Show your work.

Options are Increase/Decrease

Suppose the government decides to decrease government expenditures as a means of cutting the existing government budget deficit. Using a graph of aggregate demand and supply, show the effects of such a decision on the economy in the short run. Describe the effects on inflation and output. What will be the effect on the real interest rate, the inflation rate, and the output level if the Bank of Canada decides to stabilize the inflation rate?

Question: A recent article (federalreserve.gov/econres/feds/files/2020049pap.pdf) published by the Federal Reserve (the central bank of the USA), suggests "the massive lockdown of the economy" has led to "a large negative demand shock. However, an accompanying increase in unemployment benefits has increased the income of some low-and middle-income households at least temporarily, which could helpfully support aggregate demand". The excerpt above suggests an increase in household income, which might lead to improved aggregate demand. a. Draw a diagram to explain the above situation to show the impact of increased income and how it affects aggregate demand.

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An economy is described by the following equations: C = 2,600+ 0.8 (Y- T) - 10,000r IP = 2,000 10,000r G = 1,800 NX = 0 T = 3,000 The real interest rate, expressed as a decimal, is 0.10 (that is, 10 percent). a. Find a numerical equation relating planned aggregate expenditure to output. Instructions: Enter your response for mpc rounded to one decimal place. PAE=+ 0.8 Y b. Using a table (or algebra if you have used the appendix to this chapter), solve for short-run equilibrium output. Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Leave no cells blank. You must enter 'zero' for the answer to grade correctly. Output Y 9,500 9,600 9,700 9,800 9,900 10,000 10,100 10,200 Planned aggregate expenditure (PAE) Short-run equilibrium output: Y PAE

Suppose the economy is experiencing a recession. If the Federal Reserve enacts expansionary monetary policy, interest rates will likely Multiple Choice   rise causing investment to increase.   fall causing investment to increase.   fall causing investment to decrease.   rise causing investment to decrease.

The Reserve Bank of Australia would like to decrease the interest rates in the economy. What open market operation (OMO) action should the central bank take? Explain in detail the OMO process and its implications for the cash rate, interest rates, inflation and GDP. Draw by hand the effect of the OMO process using the MD-MS diagram.

As per the additional reading “What should be the Fed’s response to Stagflation”, all the following statements are true EXCEPT   Group of answer choices The risks of stagflation are real. The Fed should try and taper its balance sheet first and then raise the interest rate. The Federal Reserve (Fed) should raise the interest rates immediately. The Fed needs to have a more meaningful monetary tightening.