We are in eqm in the full SR model, IS-LM. Following a single shock (so that only one curve shifts), cet. par., we see that the nominal interest rate has fallen and Y has risen then we know with certainty that the Fed has engaged in expansionary policy. True, False, or Uncertain? Show graph in i-Y space and explain fully

Starting at E₁ suppose the Fed uses expansionary monetary policy then LRAS Aggregate price level, P P3 P₂ P₁ E3 E₁ E₂ ****** :AD₁ Yo Y₁ SRAS₂ AD₂ SRAS₁ Real GDP AD₁ will shift to AD2 and the economy will move from E₁ to E2. O SRAS₁ will shift to SRAS2 and the economy will move from E₂ to E3. SRAS₂ will shift to SRAS₁ and the economy will move from E3 to E₂. AD₂ will shift to AD₁ and the economy will move from E₂ to E1.

Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that, due to increased instability in the financial markets, a decrease in investor and consumer confidence occurs. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose the Federal Reserve wants the economy to return to full-employment as quickly as possible. Should the Fed intervene? If so, show the impact of successful monetary policy on your graph. Label this new equilibrium point "3."

An econometric study of the dynamics of monetary policy using U.S. data covering three decades indicates that OA. the IS-LM model accurately captures the short-run behavior of the economy in response to these policies. OB. the IS-LM model fails completely to predict the economy's short-run response to policy changes. OC. only the long-run behavior of the economy is accurately captured by the IS-LM model. OD. use of the IS-LM model for prediction purposes is basically a risky or uncertain estimate. The predictive reliability of the IS-LM model appears to weaken over time because the assumption of a given price level becomes realistic less more

Which is NOT needed for the Fed to design and implement effective monetary policy to reduce the severity and length of a recession? the ability to control the money supply in a timely manner the ability to change taxes banks that are responsive to the Fed's actions reliable, accurate data about the state of the economy

Consider the Keynesian sticky wage model. Consider a temporary increase in current produc- tivity, z. 1. Using graphs, show the effect of higher z on output, employment, prices, the real interest rate, and the real wage. 2. Consider the effect of the same shock in the monetary intertemporal model. Using graphs, show the effect of higher z on output, employment, prices, the real interest rate, and the real wage. 3. Compare the change in output and prices in the two models. 4. Explain and show graphically how, in the Keynesian model, monetary policy could be used to induce a change in output equivalent to that in the monetary intertemporal model.

Consider an economy in the long run. Using the dynamic ADAS model, if the Fed lowers its target real LR interest rate: LRAS shifts rightward LRAS shifts leftward DAD shifts rightward DAD shifts leftward

tab lock K →1 Question 20 esc Keynesian economists O believe that the classical dichotomy does not hold in the short run O believe that monetary policy affect aggregate output and the real interest rate O observe that prices respond slowly to changes in supply and demand O all of the above Onone of the above A Moving to another question will save this response. Type here to search ? Q 12 S 13 # D $ R % M 5 E D 16. 1 G