Which of the following statements are INCORRECT? "When faced with income shocks, household may not be able to smooth their consumption due to credit market exclusion that hinders their ability to borrow." "Any estimate of potential output will have shortcomings, and for this reason, policy makers do not use output gap to make policy decisions." "In the case of a negative aggregate demand shock that brings output below potential, there is no need of central bank intervention as there is no inflationary pressure in the economy." "When the economy is at its potential output, actual unemployment is equal to equilibrium unemployment"

Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility.Using a graph of aggregate demand and supply explain (a long explanation) how the credibility of each country’s central bank affect economic outcomes, if both countries are hit with the same b) negative temporary aggregate supply shock?

(a) Suppose that, in a liquidity trap, bank reserves are less liquid than government debt. If the central bank conducts an open market sale of government debt, what will be the effect on the price level? Use a diagram, explain your results. (b) Suppose that there is a decrease in the price of housing, which the central bank judges is a temporary asset price decrease. In the New Keynesian model, determine the central bank's optimal response to this asset price increase, using diagrams. (c) Suppose initially that inflation is at the central bank's target and the output gap is zero. Then, government spending goes up. Determine, with the aid of diagrams, how the degree of price stickiness affects the central bank's optimal response and explain your results.

Use the IS-LM model to analyze the short run impact of a fall in consumer confidence on the economy. You must provide a complete discussion of the impact including how the shock transmits through the economy & illustrate the impact on a diagram. The discussion must explain how consumers and producers respond in the economy; this means an intuitive discussion must be provided [see lecture for example].

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Assume an economy that starts with Y = Y₂. Illustrate graphically and explain the impact of a fall in energy prices in the IS-LM-PC model with anchored expectations. Illustrate graphically, explain, and discuss the impact of the fall in energy prices depending on whether the central bank, firms, or workers have the power to adjust the economy to keep inflation at its target rate after the fall in energy prices. ་པཕབ་པ་

Consider the short-term model characterized by the following AS and AD curves: Ý, = à – bm(x, – ñ) (AD] and A; = x; + vỶ, + õ, (AS). The economy is in steady state at time t = -1 (that is, a-1 = ñ, ō-1 = 0, and ā = 0). It is hit by a one-time inflation shock öy = .025 at time i = 0. For now, expectations are adaptive: 7 = ,-1. You'll use the answer to this question in several follow-up questions. To keep track of your results, you should use a spreadsheet application. If you don't already have one, you can use this hyperlinked template e (it's a Google Sheet). Calculate zo assuming b = 0.5, m = 2, ñ = 0.03, and ū = 1. Enter your answer as a percentage and round to the nearest hundredth.

Complete the following table to compare the results of an unanticipated expansionary policy to those of an anticipated expansionary policy in the short run and long run. Determine whether, in the short run, the level of output increases, decreases, or remains unchanged relative to the potential output level when the expansionary policy is anticipated versus unanticipated. Additionally, determine whether, in the long run, the actual price level is above, below, or the same as initial expectations under both scenarios, and, again, determine whether the level of output increases, decreases, or remains unchanged.   Anticipated Expansionary Policy Unanticipated Expansionary Policy Short-Run Change in Output Decrease/Increase* Decrease/Increase/No Change* Long-Run Change in Price Level Same as Initial expectation/Higher then initial expectations/ lower then initial expectations* (same options as box on the left) ** Long-Run Change in Output       Decrease/Increase/No change*…

Suppose that the following equations represent an entire economy. What size output shock will send the economy into a liquidity trap? t = y0.5 (r - 3%) r = 2% + (πt - 2%) + 2.9t πt = 2% + t

Identify the most significant sources of disruption over the past several years and propose policies to address them. Consider the following factors in your response: How will your policy recommendations impact Aggregate Demand and Supply? Discuss the potential trade-offs associated with different program options. Evaluate the effects of the proposed policies on future economic growth possibilities, including their impact on the Production Possibility Frontier (PPF) and long-run aggregate supply. Analyze the potential effects of the policies on debt and budget deficits. Assess the impact of the policies on private investment and discuss whether crowding out is a concern in the short run versus the long run. Examine how your proposals may affect income distribution, consumer confidence, and spending. Predict the potential effects of your policy recommendations on GDP growth, price levels, and employment.