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- Aggregate demand and supply curves have been widely used to analyze the performance of the macroeconomy. Figure 6-3 shows four diagrams that represent different changes in the macroeconomy. Choose the diagram that best represents the situations described in the following questions. FIGURE 6-3 Real GDP (1) Real GDP (2) Real GDP (3) Real GDP (4) 19. Which graph best represents a government stabilization policy to counteract inflation? a. 1 b. 2 c. 3 d. 41.At which equilibrium point does the economy have inflationary gap and what is the value of such gap in percentage point 2.what government policy should be recommended for this specific macroeconomic problem ? 3. What does e1 represent?1. Explain the difference between Keynesian economics and Classical economics by mentioning the complete name of the economist who develops the theory/model. 2. Describe each of the components of the GNP equation and which one you feel can distort GNP the most.
- 1. Suppose that the oil price sharply increased for a while, which increased production costs, causing an adverse supply shock. A. Use the AD-AS model to show the effects on output and the price level in both the short- run and long-run. B. Show the adjustment process of the economy from the short-run to the long-run. C. What is the effect on unemployment in short-run and long-run? D. Can policymakers do something to accommodate this shock? Would the outcome be different in this case?Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen economic fluctuations. NOTE: make sure to ADJUST GRAPH to the proper formatiom! NOTE: options for blanks 1. According to the graph, this economy is in ______ (a recession OR an expansion) 2. natural rate of output, the government could use ______ (an expansionary OR a contractionary) monetary policy such as _____ (decreasing taxes OR increasing taxes) 3. __________(leave the economy unchanged OR increase the long run capacoty to produce goods and services OR push the economy beyond the natural rate of output OR fall short of the natural rate of output) once the effects of the policy are fully realized.The following are examples of macroeconomic questions that remain debated among economists and policy-makers: 1. Does economic growth create inequality in income and wealth? 2. Do lower wages reduce unemployment? 3. Is there a trade-off between unemployment and inflation? 4. Is a large government debt a problem? 5. Should central banks target inflation in asset prices or only in consumer prices? Choose any two of the above questions and in each case briefly outline the economic reasoning behind different viewpoints.
- Hey, I need help with a macroeconomics problem. Thank you in advance! The questions are based on a Feb 1, 2023 statement by the Federal Reserve (attatched below) Effects mentioned in question: - Inflation is expected to increase - The Committee's choice to raise the target range for the federal funds rate and potentially keep on expanding it in the future recommends that they might be taking a more restrictive stance on monetary policy. How do the effects you you previously found align with what the Fed was hoping to attain?You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. 1. What is the fed trying to do?A. slow down the economyB. stimulate the economyC. remains unchanged 2. How is the fed doing it?A. buying bondsB. selling bondsC. remains unchanged 3. What happens to bond prices?A. increaseB. decreaseC. remains unchanged 4. What happens to the interest rate?A. increaseB. decreaseC. remains unchanged1. Paul and Mary wanted to get married, and they wished to purchase a house for the new family. Therefore, they had arranged a meeting with a banker to know more about the mortgage details. They all expected that inflation will be 3 percent over the borrowing period, and the banker offered them a nominal interest rate of 6 percent. As it turns out, the inflation was 5 percent over the term of the loan. a. What was the expected real interest rate? b. What was the actual real interest rate? c. Who benefited and who lost because of the unexpected inflation?
- 4. Let ́s suppose the economy needs to be more dynamic. Propose a policy that will achieve low levels of inflation without provoking too much unemployment: 4.a. How effective is going to be this policy under the general model of AD-AS with rigidities in the labor market. Explain and use graphs. 4.b. If the AS is based on expectations over inflation, when this policy can be fully effective? Explain and use graphs.In the basic New Keynesian model, suppose that there is an increase in government spending. • First, suppose that the central bank does nothing (accommodates the shock). Illustrate onthe graphs and explain what will be the effects on inflation and output? • Second, suppose that economy initially has inflation equal to the central bank’s inflationtarget and an output gap of zero. What action do you expect the central bank wouldundertake? Illustrate you answer on the graph and explain. PLEASE SHOW ALL HAND WRITTEN STEPS AND WORK!4. Select all the statements below that represents characteristics of the neo-classical macroeconomic model: A. Potential GDP determining the size of the economy B. Sticky prices and wages C. Flexible prices and wages □D. Focus on long term macroeconomic conditions □E. Focus on government intervention in the economy