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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.The figure above shows the Aggregate Supply (AS) and Aggregate Demand (AD) curves for an economy that is currently at equilibrium producing Y0 units of output. What would be the result of a positive shock to AS if there is no change to AD? Question 12Select one or more: a. lower output levels b. higher price levels c. lower price levels d. higher output levelsSuppose that the negative shock is long-lasting (i.e., the AD curve stays at AD'). Please explain in words how the economy evolves from Point B to the medium-run equilibrium.
- what are the causes of great depression? in particular whar are the exogenous variables in the IS\LM MODEL AND AS\ AS MODELS CHANGED TO CAUSE FALL IN OUTPUT?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..SOlVE ONLY HIGHLIGHTED QUESTION Suppose we observe that US economy is experiencing low unemployment (3%), faster-than-average real GDP growth (4%), and increasing inflation (rising from 2% to 4%). a. Draw the AS/AD graph for the kind of shock that would generate these symptoms, and give an example of how that kind of shock might happen. What kind of change in the economy leads to this kind of AS/AD graph? b. Briefly discuss what you see in the graph that corresponds to each of the symptoms. E.g. what part of the picturetells you we have low unemployment? b)Describe the two goals that the Federal Reserve is required to pursue with monetary policy. Given these two goals, what specific actions will the Fed take in reaction to the shock, and how will these affect real GDP in the short run? Be sure to explain how the proposed action helps achieve the Fed's goals.
- 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? b. analyze the effects of an oil supply shock that causes a temporary increase in the 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 supply? c. consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. analyze the effects of a decrease in the inflation target from m to mt. explain the mechanism behind the adjustment to the new steady state.The figure above shows the Aggregate Supply (AS) and Aggregate Demand (AD) curves for an economy that is currently at equilibrium producing Y0 units of output. What would be the result of a negative shock to AD if there is no change to AS? Question 13Select one or more: a. Decrease in output b. Increase in price levels c. Decrease in price levels d. Increase in output3. 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).
- Consider if in a given economy, the parliament approves an increase in minimum wage. Starting from the medium run equilibrium, when economy is at full employment to discuss the effects of this shock. a)- Using a set of WS/PS curves, and only in labor market, in step by step way, explain the impacts. b)- Using the aggregate supply and demand (AS/AD), and IS/LM curves, show the short and medium run equilibrium points. [No explanation, only neat and well-marked graphs are acceptable]Hi, could you help me solve this problem? It is often argued that the effect of a demand shock depends on the state of the economy. In particular, a given increase in aggregate demand may induce a larger increase in inflation (or price level) if the output gap is initially positive (output exceeds natural output) than if the output gap is initially negative. The argument is that when economy’s overall production capacity is almost fully used, firms cannot expand output much in response to an increase in demand.t Draw AD and AS curves that are consistent with these ideas and explain them briefly.Please no written by hand solution Consider the following economic situations:C = $4.0 trillionI = $1.5 trillionG = $3.0 trillionT = $3.0 trillionNX = $1.0 trillionF = 0mpc = 0.8d = 0.35x = 0.15r = 1% λ = 0.5A. Calculate an expression for the IS, MP and AD curves ( r= ?, IS Y= ?, AD Y=?)B. Let AS curve be given by the relation: π = 6 + 1.5 (Y - 25.5) (i.e. the price shock is zero). What are the equilibrium values of inflation, output and the real interest rate(π, Y, r)?C. Suppose government purchases are raised from $3.0 trillion to $3.5 trillion. What are new short-run equilibrium inflation values, output and the real interest rate (π, Y, r}?D. Suppose a financial crisis begins, and ƒ increases ƒ = 3. (Assume government purchases are again as in part (a). What are the new short-run equilibrium values of inflation, output, and the interest rate (π, Y, r}?(Please solve all the parts with numerical steps so it could be practiced easily)
