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.]

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.]

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 2.3P

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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.
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?
Calculations with the IS curve: Suppose the parameters of the IS curve are a = 0,b = 3/4, r = 2% and the real interest rate is initially R = 2%. Explain whathappens to short-run output in each of the following scenarios (consider eachseparately):(a) Te real interest rate rises from 2% to 4%.(b) Te real interest rate falls from 2% to 1%.(c) ac increases by 1 percentage point.(d) ag decreases by 2 percentage points.(e) aim decreases by 2 percentage points.
a) What generally happens to the major macroeconomic variables such as GDP, unemployment rate, and inflation rate during an economic recession? b) Define economic expansion using the reference terms of actual GDP and potential GDP. c) Explain how investment spending and interest rate related. What is the reason behind such a relationship? d) Find the correlation coefficient between interest rate and Real Investment. Does this (actual) value support the theoretical relationship between the variables? Explain. (e) Explain the importance of investment spending for the economy. Only typed answer
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a) Use an appropriate diagram, to explain how the Permanent Income Theory of Consumption reconciles the results of cross-section and time series estimate of the Keynesian aggregate consumption function. (b) With the help of a diagram, explain the effect of an increase in nominal income on interest rate.
Consider an Economy in its medium run equilibrium. Now suppose that the government passes a stricter law against the exercise of market power leading to decline in mark-up over wages. Explain using IS-LM and AD-AS curves how it will affect price level, interest rate and output in the short run and in the medium run.
Explain it correctly not copy paste Q)In the Real Business Cycle model, what is the effective investment and the equilibrium investment?
1.Select one fro the given options a.The sticky wage model of AS: I. explains the vertical AS in the short run. ii. assumes flexible prices and nominal wages. iii. assumes flexible prices and sticky real wages. iv. explains the short-run deviations of the actual output from the potential one b. Choose the correct statement: i. According to the Life-cycle hypothesis the consumption changes only with unexpected changes in income. ii. Consider the life cycle hypothesis. The human consumption function in the form C = 0.025W + 0.5Y implies that life expectancy is 40 years iii. Consider the life cycle hypothesis. The human consumption function in the form C = 0.025W + 0.5Y implies that a half of one's life expectancy is spent in retirement iv. Consider the life cycle hypothesis. The human consumption function in the form C = 0.025W + 0.5Y implies that consumption will increase by CZK 25, when wealth will increase by CZK 1,00
Suppose the U.S. economy is initially (year 2020) in both short-run and long-run equilibrium and it is described by following functions: AD function: Y=12-P SRAS function: Y=YN+P-Pe where the expected price is Pe=2 and the natural rate of output is YN=10. Then, an expansion in AD occurs in year 2021 such that the new AD function is: Y=14-P Compute the Real GDP growth rate from 2020 to 2021 if the economy is now in short-run equilibrium only. (Express your answer in percent omitting the symbol %. For example, for 2% enter 2)
It is found that the consumption function for the economy is C = 50 + 0.8 Y d . Current level of output is 8800 and the potential GDP is 9000. Assuming the Keynesian view of the short run, answer the following questions. Illustrate this economy using a carefully labeled diagram. What is a larger concern for this economy: unemployment or inflation? If the economic policy makers want to bring the level of output to the potential GDP by changing the government expenditures (G), how much do they need to change G? Be sure to indicate whether the change is an increase or decrease. True or False and explain: If the policy in part c was successful, the unemployment rate will be zero.