Describe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag. Give the economic intuition of the results on consumption, investment, productivity, wages and price levels. [Note, I am looking for the correlation between each of these items and income. Give leads and lags only when the most important correlation is not contemporaneous. You may trust the author of the book on this one.]

Describe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag. Give the economic intuition of the results on consumption, investment, productivity, wages and price levels. [Note, I am looking for the correlation between each of these items and income. Give leads and lags only when the most important correlation is not contemporaneous. You may trust the author of the book on this one.]

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 53CTQ: The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both...

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The AD/AS model is static. It shows a snapshot of the economy at a given point in time. Both economic growth and inflation are dynamic phenomena. Suppose economic growth is 3 per year and aggregate demand is growing at the same rate. What does the AD/AS model say the inflation rate should be?
Describe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag.
Describe the behavior of consumption, investment, labor, productivity, wages, the price level and the money supply over the business cycle both in terms of correlation, magnitude and lead vs lag. Give the economic intuition of the results on consumption, investment, produc- tivity, wages and price levels. [Note, I am looking for the correlation between each of these items and income. Give leads and lags only when the most important correlation is not contemporaneous. You may trust the author of the book on this one.]
Explain what happens to the economy if there is a temporary consumption boom that lasts for one period and the central banks keeps the nominal interest rate unchanged
In section 5.2 we showed that if the money stock follows a mst-order autoregressive process with c (a) Give the economic intuition behind this result. (b) Suppose that the growth rate of money follows a stable mst-order autoregressive process. Solve for the process for the price level. (c) Does the same characterization hold with the addition of the words "relative to trend" following high and low?
Assume that nominal wages are sticky and that firms determine the level of employment in the short run. Use an AD/AS diagram to model the goods market, a labor demand/supply diagram to model the labor market, and the loanable funds diagram to model the financial market. Assume that in addition to the real interest, consumption depends on current disposable income and the present value of future disposable income. Speculate what would happen in the current time period to equilibrium output, prices, real interest rates, savings (and consumption) and investment expenditures, real wages and employment as a result of: (Please include diagrams) a.An increase in the money supply .b.Government spending increases as a result of an increase in military expenditures. Assume that government budget remains balanced. c.A permanent change in technology that results in greater output for the same amount of inputs and that increases the marginal products of labor and capital. d.There was a temporary…
Discuss the short run impact (increase, decrease, unchanged, or uncertain) of the decrease in desired consumption on real output, the interest rate, the price level, the unemployment rate, investment, government spending, and net taxes. As part of your discussion do not just state direction, but also give a brief - one sentence - reason for each.
Which of the following statement is false? A. Consumption smoothing occurs when people borrow and save to smooth consumption over their lifetime. B. When making decisions about savings and borrowing, households and firms care more about the nominal interest rate than the real interest rate. C. Fisher equation describes the relationship between nominal and real interest rates under the effect of inflation. D. Movement along the demand curve for loanable funds is caused by a change in the interest rate.
Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph: The higher-than-expected price level causes firms to earn_____profit than they expected on each unit of output they produce, and, therefore, they_____their production level. At the same time, the real value of wages and other resource prices is_____than workers and firms expected when they signed long-term contracts. As a result, the economy as a whole produces at a level______its full-employment output, and the unemployment rate is_____than its natural rate. Now, suppose prices remain higher than expected. As a result, in the next round of labor negotiations, unions demand and obtain higher wages for their members. The following graph shows the long-run aggregate supply curve (LRASLRAS) at full-employment output for this economy as well as the same initial short-run aggregate supply curve as in the first graph. Shift one or both of these lines to illustrate how the economy…
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.
The consumption function of the economy of Macro-land is given by ? = 200 + 0.75(? − ?)The investment function is given by ? = 200 − 25? . Government purchases and taxes are both 100. (a) Find the equation of the IS curve (b) The money demand function in Macro-land is given byMd= ? − 100? The nominal money supply M is 1,000 and the price level is 2. Find the equation of theLM curve (c) Find the interest rate and income for which the goods and services and money marketsare simultaneously in equilibrium. (d) Suppose the government purchases are raised from 100 to 150. What are the newequilibrium interest rate and income? (e) Suppose that the money supply is raised from 1,000 to 1,200. What are the newequilibrium interest rate and national income? (f) How will fiscal expansion in the country (Macro-land) affect national income,employment, interest rate, price level and real money balance under the Keynesianaggregate supply condition? NB: Kindly answer all questions
1. Suppose that output is produced according to the production function Y = K [(1 - u)L], where K is capital, L is the labor force, and u is the natural rate of unemployment. The national savingrate is s, the labor force grows at rate n, and capital depreciates at rate d.a. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u).b. Write an equation that describes the steady state of this economy. Find the steady state capital per worker and steady state output per worker.c. Does this production function have constant returns to scale? Explain. 2. 2. A small open economy is described by the following equations: C = 60 +.75(Y - T)I = 150 - 20rNX = 150 – 50eM/P = Y - 40r G = 1500M = 2000 P=2R* = 5Assume a balanced budget.a. Derive and graph the IS* and LM* curves.b. Calculate the equilibrium exchange rate, level of income, and net exports.c. Assume a floating exchange rate. Calculate what happens to the exchange rate,…