1. Using the AS-AD model, graph and explain the effects of Covid-19 on the U.S. macroeconomy by comparing 2019 vs. 2020. Label the years on all curves, the axis, and the equilibrium. Ignore macroeconomic policy responses, such as the CARES act. Which curves shifted which direction, and why? 2. Now introduce any macroeconomic policy response. What curves shift which direction, and why? 3. What were the equilibrium quantities for both axis?
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1. Using the AS-AD model, graph and explain the effects of Covid-19 on the U.S.
macroeconomy by comparing 2019 vs. 2020. Label the years on all
the equilibrium. Ignore
curves shifted which direction, and why?
2. Now introduce any macroeconomic policy response. What curves shift which direction,
and why?
3. What were the
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- Using the AS-AD model, graph and explain the effects of Covid-19 on the U.S. macroeconomy by comparing 2019 vs. 2020. Label the years on all curves, the axis, and the equilibrium. Ignore macroeconomic policy responses, such as the CARES act. Which curves shifted which direction, and why?question 3Consider the AS-AD and three-equations models of a closed economy discussed in the course.(a). Write down the expressions for the AS and AD curves and interpret the expressions: what is the intuition behind the two curves? What must be true of the model parameters and variables in the long-run equilibrium, i.e. in the steady state?(b). Analyse the effects of an oil supply shock that causes a temporary increase in inflation, using the three-equation model. Assume that the shock lasts for one-period and then assumes the value 2%. Describe the mechanisms that bring the economy back to long-run equilibrium. What happens to aggregate demand?(c). Consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. Analyse the effects of a decrease in the inflation target from ? to ??. Explain the mechanisms behind the adjustment to the new steady state.Please note that this is a multi part quesition; thank you so much for your time and effort it means so much to me! Figure 1: Hayek’s (Classical) AD-AS Model (Image normally goes here) Part 1: Why does Hayek’s aggregate supply curve always lead to an equilibrium level of national output equal to the full-employment level of real GDP? Part2: Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? Part 3: Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not?
- 6.1.What is an AD-AS model and what does such a model as per the givendiagram essentially focus on?6.2.Discuss the diagram in detail by first explaining what leads to step Step 1(representing a shift in curves on the diagram) and indicating what occursto cause shifts in some of the curves. Then discuss Step 2 (whichrepresents other macroeconomic changes) and indicate what happens toother variables when there are shifts in some of the curves as per Step 1. 6.3.What, in general, do the points of intersection between the AS and AS2curves and the AD curve show?6.4.When the LAS curve moves to the right to LRAS2, what exactly do thepoints of intersection between the AS and AS curves and the AD1 curve,indicated as point 1 and point 2, reflect on the diagram?a. Compare the traditional Keynesian, new Keynesian, and real business cyclemodels in terms of expectations, price flexibility, and potential sources ofbusiness cycle fluctuations. b. What are the financial frictions and how do they affect the IS curve? Whatrole do financial frictions play in starting or intensifying recessions?Q. 2 The outbreak of COVID-19 has had a significant impact on the economy. Let’s assume a COVID shock that leads to lockdown, and we start from the medium equilibrium output level, Yn. Please explain the impacts of the pandemic and lockdown on the economy using the ASAD framework. a) Show the impacts of the pandemic and lockdown on the economy in the short run by drawing the diagram of AS-AD model
- 10. Which of the following are reasons why the short-run Aggregate Supply curve shown in the right-hand diagrams may be vertical? a) The economy at this level of real GDP would be operating beyond the full-employmetn level. b) Inflationary expectations have set-in so, the owners of resources are acting on these inflationary expectations and insisting on higher resource prices in anticipation of future products price inflation. c) Short-run Aggregate Suply in the Classical model is always constant. d) All the above e) Only (a) and (b) are true. f) None of the above.Please no written by hand solution Consider a scenario of a closed economy in the short run where price level is fixed. Assume that bothtaxes and money supply increase in a way that keep output constant in equilibrium (suppose that themarginal propensity to consume is less than one). Which of the following may result from the policychange?a) It will lead to an increase in investment but a decrease in consumption.b) It will result in an increase in investment but a decrease in government spending.c) It will lead to an increase in investment and private saving.d) It will decrease investment but increase in public saving.Russia’s invasion of Ukraine is causing energy prices to soar in the euro area (at an annual rate of 39% according to the Economist, June 2022). (1.a) What kind of economic shock is this for the euro area (AD or AS; positive or negative)? Use the AD/AS model to predict the effects of this shock on euro area output, prices, employment, and unemployment. Does it matter whether the shock is permanent or temporary? How must fiscal policy respond if the government’s target is price stability? How will this policy change your answer about prices, employment, and unemployment? Include the AD/AS grap
- The imaginary country of Harris Island has theaggregate supply and aggregate demand curves as Table24.3 shows. a. Plot the AD/AS diagram. Identify theequilibrium.b. Would you expect unemployment in thiseconomy to be relatively high or low?c. Would you expect concern about inflation in thiseconomy to be relatively high or low?d. Imagine that consumers begin to lose confidenceabout the state of the economy, and so ADbecomes lower by 275 at every price level.Identify the new aggregate equilibrium.e. How will the shift in AD affect the originaloutput, price level, and employment?09. The left-hand Which of the following statements is tru about the diagrams above depicting the macroeconommy in both Keynesian and Classical frameworks and a change from AEo to AE* and ADo to AD*? a) The left-hand diagrams show the effect of an increase in Aggregare Expenditures (and Aggregate Demand), where the short-run Aggregate Supply is horizontal, meaning a constant products price level. b) The right hand diagrams show the effect of an increase in Aggregate Expenditrues (and Aggregate DEmand), where short-run Aggregate Supply is vertical (constant Aggregate Quantity Supplied). c) The left-hand diagrams illustrate the Keynesian range of the shor-run Aggregate Supply curve, where Keynesian expansionary policy does not cause any inflation and thus is very effective. d) The right-hand diagrams illustrate the Classical or Monetarist range of the short-run Aggregate Supply curve, where Keynesian expansionary policy is totally dissipated in…3. a) Using AD-AS model, explain how a negative demand shock due to COVID 19 will affect the economy in the short run and long run (Show short run and long run adjustment in a single diagram).