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- Suppose the Federal Reserve begins to Increase the supply of money at an Increasing rate. What Impact would that have on GDP, unemployment, and inflation?What is the Keynesian prescription for recession? For inflation?Refer to the table below. (SEE PICTURE) Suppose that aggregate demand increases such that the amount of real output demanded rises by $19 billion at each price level.Instructions: Enter your answers as whole numbers. a. By what percentage will the price level increase? Will this inflation be demand-pull inflation or will it be cost-push inflation? b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?
- Cd= 200+.8Y - 500r Id= 200 – 500r Real interest rate r in the equilibrium equals .2. What is the government spending G of this economy so that its full employment output of Y is 1000? Suppose M bar=8000 and r=.2. L(Y,r)=.75Y-250r. What is the price level P in this economy for Y=1000? Please draw your IS-LM curves in your graph. Use the graph to illustrate what may happen if the company had an adversary price shock.2) The short and medium run a) Suppose that the mark-up of goods prices over marginal costs is 10% and that the wage-setting equation is W = P(1 – u), where u is the unemployment rate. Calculate the real wage, asdetermined by the price-setting equation and the natural rate of unemployment. b) Consider a situation (A) where the government increases its spending G, while keeping thetaxes T unchanged leading to an expansionary fiscal policy. Show in diagram below, whathappens to output and prices in the (B) short run and (C) medium run? Don’t forget to label theaxis.(images)Q4. a) With respect to the Business Cycle, what is the definition of: leading indicator,coincident indicator, and lagging indicator? Provide 2 examples of each leading, coincident and lagging indicator. b) Define the three ranges of the aggregate supply curve in the AD/AS framework. c) Describe the types of unemployment classification. d) Define what is 'automatic stabiliser' in fiscal policy, and provide 2 examples.
- 30. What is the difference between a recession and a depression? A. A depression is the opposite of a recession. B. A depression occurs at the peak of the business cycle, while a recession occurs during a contraction. C. A depression is a particularly severe and long-lasting form of recession. D. A depression is caused by government inaction, while a recession is a natural feature of the business cycle.(1A) Typically, if consumer and business confidence is falling then ________ and if consumer and business confidence is rising then ________. (a) AD shifts to the right; AD shifts to the left(b) AD shifts to the left; AD shifts to the right(c) AD does not shift; AD shifts to the right (1B) Consider the following table and identify equilibrium GDP. If the potential GDP is at 12.0, what can you conclude about price levels and the unemployment rate? Current Price Level Real GDP-quantity demanded per trillion Real GDP-quantity supplied per trillion 120 6.0 10.0 115 8.0 8.0 110 11.0 6.0 100 13.0 5.0 (A) The economy has stable price levels and low unemployment because it is operating above the potential GDP.(B) The economy has high unemployment but experiences stable price levels because the economy operates below the potential GDP.(C) The economy is experiencing rising price levels and has a low unemployment rate because it is operating…3. . If the government wants to reduce unemployment, government spending should be--- and/or taxes should be-------. increased; increased decreased; decreased decreased; increased increased; decreased
- 34. The difference between the two sets of graphs (Figure 1 and Figure 2) is that a) Figure 1 depicts changes in price level only, while Figure 2 shows changes in the rate of inflation. b) Figure 1 shows changes in autonomous spending, while Figure 2 shows changes in supply. c) Figure 1 depicts changes in price level only, while Figure 2 shows changes in autonomous spending (changes independent of price). d) Figure 1 shows changes in the mpc, while Figure 2 shows changes in autonomous spending.Title If someone could show me how to solve this IS-LM problem that would be very helpful. Thanks! Show tr Description If someone could show me how to solve this IS-LM problem that would be very helpful. Thanks! Show transcribed image text Desired consumption: C^d = 580 + [0.55 x (Y - T)] - 45r Desired investment: I^d = 430 - 40r Real money demand: L = 0.6 Y - 95i Full-employment output: Y = 2,210 Expected inflation pi^c : 0.03 In this economy the government always has a balanced budget, so T = G, where T is total taxes collected. a. Suppose that T = G = 150 and that M = 4,320. Use the classical IS-LM model to determine the equilibrium value of the real interest rate. (flint: In the classical model output always equals its full-employment level.) The equations are: The initial equilibrium values of output, real interest rate, consumption, investment and the price level were found to be: Output = 2,210 Real interest rate = 0.97 Consumption = 1,669.4 Investment = 391.2 Price…1-)What is the difference between a real rate and a nominal rate? Say you got a raise of 10% of your salary but inflation increased by 15%, what is your real percent increase in salary? How should we use this in every day life to make changes that will make us wealthier over time. 2-) How can we use the Aggregate Supply and Demand Model to help us understand what the government is doing in the current Covid19 economic crisis? 3-) What is the basic difference between Fiscal and Monetary Policy, how are they used during recessions? 4-)