Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 15, Problem 8E
(a)
To determine
Impact of increase in government purchases in the AS‑AD framework.
(b)
To determine
The impact of increase in increase in government purchases on the impulse response function of GDP.
(c)
To determine
The impact of increase in government purchases on the impulse response function of inflation.
(d)
To determine
Comparing the impulse response function of GDP and inflation to the Smets‑Wouters model.
(e)
To determine
The impulse response function for working hours with the AD‑AS framework with respect to Okun’s law and its comparison with the Smets‑Wouters model.
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Relating DSGE and AS/AD for a shock to government purchases: Consider thecomplete dynamic response of the economy to a temporary rise in governmentpurchases in the AS/AD framework.(a) Draw the AS/AD graph associated with this shock.
Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of a increase in government spending and an increase in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis. With diagrams
Assume that an economy is initially operating at the natural rate of output(full employment output). Use the AD-AS model to illustrate graphically the effect on price and output of an increase in government spending and a decrease in the cash rate . Explain your assumptions with respect to the range of aggregate supply of your analysis.
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Macroeconomics (Fourth Edition)
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