6. Suppose an economy is hit by natural disaster and its natural resources decreases.a) Show graphically using AD-AS model how the price level and output are affected in the short-run.b) Can the government use monetarv policy to offset the effects on both price level and output simultaneously,explain?

In the free economy, the equilibrium level of output and price is determined by the forces of…

Answered: 6. Suppose an economy is hit by natural…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 8PA

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5. Suppose an economy is hit by a flood and its natural resources decreases. a) Show graphically using AD-AS model how the price level and output are affected in the short-run. b) Can the government use monetary policy to offset the effects on price level and output, explain?
Q.Assume that a commercial real estate whose monthly rent is TRY6,000 is to be sold at TRY4,000,000. Inflation rate has been 10% and the nominal interest rate 16% on the average for the last 15 years. The economy has grown at a real rate of 4% over the same period, so have rental revenues. If an investor has adaptive expectations, should he/she buy the real estate or not? Explain why.
1.Now suppose that the increase in investment spending was entirely anticipated by firms and workers. This means the public fully anticipates the rightward shift of the aggregate demand curve (from AD1AD1 to AD2AD2). According to rational-expectations adherents, the anticipated change in aggregate demand will cause the economy to move in which direction? A.Directly from point N to point Z B.From point N to point K, before returning to point N C.From point N to point D, before returning to point N D.From point N to point D and, eventually, from point D to point Z 2.Suppose next year, the Fed once again announces that its monetary policy is aimed at maintaining price stability at the level reached last year (the price level you found in the previous question) and output at potential output ($8 trillion). However, because the government reneged on its promise last year, workers and firms suspect that the Fed will again shift to an expansionary policy. As a result,…
(a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Real GDP Consumption Planned Investment Government Purchases Net Exports $1,000 $1,000 $100 $150 -$50 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4,000 3,700 100 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is…
4. In the real business cycle model, suppose a war or natural disaster destroys some of the: nation's capital stock. The central bank goal is to stabilize the price level. Given this goal, what should the central bank do in response to the disaster? 5. Explain how the real business cycle model can explain why the price level is countercyclical at some times, and uncorrelated with output at other times.
Specific subject - Macroeconomic Analyse the case of a negative supply shock caused by an increase in oil prices and compare with the shock caused by the Covid pandemic. What would be the similarities and differences between the two shocks? What would be the effect of an expansionary economic policy (increase in aggregate demand)? Graph What measures or government intervention would be most appropriate to deal with both types of shocks? Graph Compare the adjustment in both cases with and without government intervention. Graph
Describe the emphasis that the neoclassical perspective takes on the macroeconomy, relative to the Keynesian perspective (Chapter 12). Discuss the importance of capital per person and the role of flexible prices in their perspective. What role do rational or adaptive expectations play in flexible prices? (13.1)
Subject :- Economy Consider a scenario of a closed economy in the short run where price level is fixed. Assume that both taxes and money supply increase in a way that keep output constant in equilibrium (suppose that the marginal propensity to consume is less than one). Which of the following may result from the policy change? 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
13. If decision makers adjust fully to demand stimulus policies, persistent expansionary macro-policy will lead to Group of answer choices -inflation with no lasting reductions in unemployment. -a permanent reduction in unemployment. -lower interest rates. -more rapid economic growth. Which is correct?

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