Using the AD-AS model, draw a graph and explain the effect of the implementation of a restrictive monetary policy on the equilibrium price level and the equilibrium level of output.
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Using the AD-AS model, draw a graph and explain the effect of the implementation of a restrictive
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- By using appropriate diagrams, discuss the role of the monetary and fiscal policies in the New Keynesian sticky price model.Suppose an economy is hit by natural disaster and its natural resources decreases. Show graphically using AD-AS model how the price level and output are affected in the short-run. Can the government use monetary policy to offset the effects on both price level and output simultaneously, explain?Oil prices have fallen quite substantially since 2008. Moreover, the deveopment of new sources of oil and natueral gas is taking place throughout the U.S. Use the AD-AS model (along with a labor market graph) to show and explain how this will affect Y, N, W/P, and P over time. Also, explain how the decrease in oil/energy prices makes the Fed’s job somewhat easier.
- Use the New-Keynesian model with partial sticky price to briefly discuss the reasons of the current high inflation in Australia. Use the Aggregate supply-Aggregate Demand diagram to support your answer.Give a one line definition for the term "DEFICIENT DEMAND" In macro economics.Oil prices have fallen quite substantially in recent weeks. Moreover, the deveopment of new sources of oil and natueral gas is taking place throughout the U.S. Use the AD-AS model (along with a labor market graph) to show and explain how this will affect Y, N, W/P, and P over time. Does the reduction in oil prices make the Fed’s job easier or harder? Explain.
- In the last year there has been a significant increase in the inflation rate in Canada. Use the Keynesian transmission mechanism to explain fully the impact of this increase in inflation on aggregate demand.Assume that a decrease in investment expenditures drives the economy falls below full employment. What policy should the Fed take to correct the problem? Use the AD/AS model to show the policy action.Elaborate on the impact of a central bank's reduction in interest rates using the AD-AS model.
- Consider the original AD/AS model in steady state. If the central bank fights against inflation more aggressively, explain how would inflation and short-run output respond differently to aggregate demand shock? (Hint: m-bar)Consider the AD-AS model discussed during the lectures. Assume that the aggregate demand curve is given by Y=8-0.5 π, that the long run aggregate supply curve is given by Yp=7, that the short run aggregate supply curve is given by π = π_expect + 0.3(Y-Yp), and that the monetary rule is given byr=1+0.3 π. Suppose the economy is suffering a decrease in the potential level of output, due to some ill-designed new regulation. According to the AD- AS model, what is more suitable to offset the subsequent decline in output, an expansionary monetary policy or an expansionary fiscal policy?Draw a conventional aggregate demand curve on a graph. Then add three different aggregate supply curves, labeled AS1: Horizontal curve AS2: Upward-sloping curve AS3: Vertical curve all intersecting the AD curve at the same point. If AD were to increase which AS curve would lead to the least inflation? Show the graph roughly.