Aggregate demand increases if :Select one a. the Fed increases the required reserve .ratio .b. the government decreases taxes .c. the government decreases spending .d. the Fed sells government bonds
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- The government spends $3 billion to buy police cars.Explain why aggregate demand might increase bymore or less than $3 billion.I know the answer is c. Could you please explain why a, b, and d are incorrect answers in detail? Q2. QQ) If the government wants to contract aggregate demand, it can _____ government purchases or _____ taxes. a.increase, increase b.increase, decrease c.decrease, increase d.decrease, decreasea) Explain what happens to Money Demand when each of the following occurs: i, incomes rise; ii. the interest rate rises. b. Use the money market to explain why the aggregate demand curve slopes downward.
- How does government or Fed recover the economy in the short run. Please use figures and words to illustrate your explanation.If there is a temporary supply shock (the supply decreases) and the Fed or the government decides to “do something”, the curve that will shift will shift______?Group of answer choices 1That curve(s) does not shift. 2That curve(s) could shift in either direction. 3To the left. 4To the right.Suppose inflation is still high be mid-2022 and the Fed chair announces his/her policy. Suppose his or her approach to monetary policy can be summarized by the following statement: “I care only about inflation. Unemployment is at very low levels for quite some time” b) What would be the effect on the aggregate demand curve?
- Time remaining: 00 :09 :06 Economics If there is an inflationary gap, what should the Fed do? Explain, provide name, and show in i-M space. Consider the following macroeconomy, with fixed prices (all amounts are in millions of $): YFE = 7000 C = 40 + 0.9 YD I = 500 G = 250 T = 40 a. Calculate eqm Y in this model and then graph it in the Keynesian-cross diagram. Indicate and provide the name and size of the gap, if any. b. Prove that the appropriate relationship between I and various types of Savings holds at eqm. c. What two different policies could Congress enact? You must calculate the exact changes in the appropriate variables and provide the appropriate name(s) for the(se) policies. Graph each of these policies in the Keynesian-cross diagram. Show what your policies would do, if anything, in the money-market diagram, (in i- M space) cet. par. Indicate the initial disequilibrium and explain what will happen and why. d. Go back to the original eqm in part a. Now…Question: A recent article (federalreserve.gov/econres/feds/files/2020049pap.pdf) published by the Federal Reserve (the central bank of the USA), suggests "the massive lockdown of the economy" has led to "a large negative demand shock. However, an accompanying increase in unemployment benefits has increased the income of some low-and middle-income households at least temporarily, which could helpfully support aggregate demand". The excerpt above suggests an increase in household income, which might lead to improved aggregate demand. a. Draw a diagram to explain the above situation to show the impact of increased income and how it affects aggregate demand.7. Effects of an active or passive policy The following graph shows the aggregate demand curve (ADAD), the short-run aggregate supply curve (SRASSRAS), and the long-run aggregate supply curve (LRASLRAS) for a hypothetical economy. 04812162024360300240180120600PRICE LEVELREAL GDP (Trillions of dollars)AD SRAS LRAS12, 180 Suppose the economy is in short-run equilibrium. The of $4 trillion drives unemployment the unemployment rate consistent with full-employment output. Suppose public officials are concerned about the $4 trillion gap in the economy and the resulting lower-than-expected aggregate demand. The government has decided to follow a passive approach to policymaking. On the following graph, shift the ADAD curve, the SRASSRAS curve, or both to show the intended effect of this approach. Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original position, just…
- a. Explain why the aggregate short-run aggregate supply curve is upward sloping? b. What is the theory of liquidity preference? c. How does it help to explain the downward slope of the aggregate demand cure?d. Suppose that changes in the bank regulations expand the availability of credit cards so that people need to hold less cash.(i) How does that affect the demand for money? (ii) If the Central Bank does not respond to this event, what will happen to the price level?If the Federal Reserve wanted use an open market operation to combat a recession, what would they do, and what would its effect be? The Federal Reserve expands the money supply by 5%. Draw an aggregate supply/aggregate demand diagram to show the short run effect of this scenario. What happens to price and output? Which curve shifts? Which component of that curve accounts for the shift?What type of policy are this using (expansionary or contractionary)? How will it impact unemployment, GDP, inflation? How will it impact aggregate supply and demand? Will these changes harm our economy? Are they worth it?