Use the AS/AD model to determine how each of these events will affect the economy.Determine if the economy is initially to the LEFT, ON, or to the RIGHT of the LARS Type exactly one of these 3 options for credit for each of the letters.A- Initial situation: cyclical unemployment is 4%B initial situation: overutilization of resourcesC-Initial situation: inflationary gapD-Initial situation: the unemployment rate is equal to the natural rate of unemploymentE-Initial situation: a positive GDP GAPF-Initial situation: unemployment rate of 6% (US economy)G-Initial situation: cyclical unemployment is zero.H-Initial situation: a recession

The objective of the question is to determine the position of the economy with respect to the…

Answered: Use the AS/AD model to determine how…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use a standard dynamic AS-AD model to explain how the macroeconomy adjusts following a favourable supply shock (vt < 0) for one period which reverts to zero for all subsequent periods. Assume that the economy starts from its long-run equilibrium. As a reminder, the DAD and DAS curves, respectively, are provided below: Y =Y - αθη 1+aly Tt = t_1+ ¢(Y - Y)+v where Y is output, πt is inflation, 0 and Oy capture the responsiveness of the central bank to inflation and output, a is the sensitivity of output to the real interest rate and is the sensitivity of inflation to the output gap. Y is the natural output level, and π* is the central bank's inflation target. [Hint: It will be helpful to work this question out using diagrams, but you are not required to provide them as part of your solutions.] -(πt - π* π*) + 1+aly Et A. (2 points) Explain the impact effect of this shock on output, inflation, and the real interest rate. B. (3 points) Explain the dynamic response of output, inflation, and…
Consider the Ramsey Model of the macroeconomy. Explain using a phase diagram how an economy starting from any point in phase space reaches the unique steady state solution. Now suppose once the steady state is reached that there is an unexpected permanent fall in government spending. Explain, using a phase diagram, how the c ̇ = 0 and k ̇ = 0 curves are affected and how the economy moves to a new steady state. How are interest rates affected during the transition to the new steady state? Explain your answer.
If most people have rational expectations, how long will recessions last? Explain using your beliefs and experiences coupled
Is fiscal policy, say an increase in government expenditures (G), effective according to the Real Business Cycle (RBC) theory? If it is, should it be used? Explain by using production function, labor market, goods market and asset market equilibrium tools.
Assume the following macroeconomic conditions in the United States and that US policy makers desire to achieve their three macro-policy goals defined in the usual way. A. Output has fallen below potential output, creating a large negative output gap. B. The employment rate has fallen, creating an unemployment rate of 10%. C. The inflation rate has fallen to 1% per year. Which statement is CORRECT? Output is too high; the unemployment rate is too low; and inflation rate is too high. Output is too low; the unemployment rate is too high; and the inflation rate is too low. Output is too high; the employment rate is too high; and the inflation rate is too high. Output is too high; the employment rate is too low; and the inflation rate is too low. Output is too low; the unemployment rate is too high; and the inflation rate is too high. A Moving to the next question prevents changes to this answer. 19 átv Nc for Question 7 of 14 P
Draw and properly label an AD-AS model to show Keynesian, intermediate, andneoclassical zones (6%). Then, briefly explain the levels of unemployment, inflationand real GDP in each zone, and also confirm whether all three goals of a macroeconomy are being achieved in each zone. (14%)
Explain the role of expectations in the macroeconomy.
the August unemployment figures for Australia were surprisingly better than predicted (did not continue to increase) given the collapse that occurred in the economy due to COVID closures. (a) Use the static AD-AS model to explain the short run impact of the COVID closures on the economy and discuss the implications this has for unemployment. b) Comment on the limitations of the static AD-AS model in analysing the situation under COVID.
Distinguish between the following concepts as they apply to Elements of Macroeconomics. Give examples to support your answers a. Keynesian School and Classical schoolb. Aggregate Demand and Aggregate Supply
Is fiscal policy, say an increase in government expenditures (G), effective according to the Real Business Cycle (RBC) theory? If it is, should it be used? Explain by using production function, labor market, goods market and asset market equilibrium tools.
Egypt authorities faced significant health and economic policy challenges during the COVID19 Pandemic, shutting down certain industries to protect public health. This shutdown resulted in almost 1 million jobs lost in April and May 2020, and a dramatic fall in consumers’ and firms’ confidence to spend and invest. Describe the effect that a fall in confidence had upon output in the Egypt economy using a Keynesian model of the macroeconomy. Ensure that your analysis includes the following:(i) the components of expenditure that are affected and why;(ii) the adjustment process associated with moving from an initial equilibrium (before the onset of the pandemic) to a new equilibrium (after the significant job losses), i.e. the mechanism that leads to a change in output (including a relevant diagram);(iii) an explanation of what the multiplier is and its role in explaining the fall in output; and(iv) a discussion of the policy actions that can restore aggregate demand to its initial level.
Please do parts ABC

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