Discuss, with the aid of an aggregate output market diagram, what kind of monetary policy can be adopted to restore the economy to the full employment equilibrium.
Q: Describe expansionary and restrictive monetary policies, and explain why and how they are used…
A: The expansionary and restrictive monetary policy are implemented by the fed. In the case of the…
Q: they must be willing to accept a higher rate of unemployment.
A: Explanation: A contractionary policy refers to the government or financial organization's actions…
Q: What is the impact if a central bank does not change its monetary policy at full employment? Output…
A: Monetary policy is a policy tool that is used by the central bank to control the money supply in an…
Q: An economy is currently experiencing inflation that exceeds the target rate set by the central bank.…
A: Central bank has a dual mandate of managing employment and price stability in the economy. Central…
Q: Market participants, including financial institutions, fund managers and corporations, must…
A: Macroeconomics is a part of economics that deals with decisions, production, and allocation of…
Q: The short run sequence of events following an unanticipated shift to a more restrictive monetary…
A: A decrease in the money supply or the increment in the short-term interest rates constitutes a…
Q: Assume the fiscal authority reduces taxes and, at the same time, the central bank engages in a…
A: Fiscal policy: fiscal policy refers to the policy used by the government to regulate money supply in…
Q: Which monetary policy would most likely increase aggregate demand? Multiple Choice Increasing margin…
A: The aim of the expansionary monetary policy is to increase the money supply in the economy. As the…
Q: Discuss whether the monetary policy can capably create real effects under the following scenarios…
A: The central bank of the economy is responsible for maintaining the price stability and the maximum…
Q: stabilize economic
A: Depreciation of currency would cause the increase in quantity being demanded of exports.…
Q: Part (b) Discuss, with the aid of an aggregate output market diagram, what kind of monetary policy…
A: b) The aggregate output(Y) is a function of price(P). In the short run, the prices are rigid or…
Q: The focus of monetary policy nowadays is by using interest rate as an indicator. True False
A: Monetary policy is used by the central bank to regulate the money supply in the economy.
Q: Despite ongoing debates about the appropriateness of macroeconomic policies, many macroeconomists…
A: The actions and statements of a central bank that manages the money supply are known as monetary…
Q: Elaborate on how the following monetary policies can be used as a tool to mitigate the impact on…
A: 1. Aggregate demand may be a Keynesian thought that describes associate degree economy's overall…
Q: By using aggregate demand (AD) and aggregate supply (AS) curves show and explain how an…
A: In an economy, any change in market condition will have significant impact on the equilibrium in…
Q: Why are Keynesians more likely to advocate expansionary monetary policy to eliminate a recessionary…
A: Recessionary gap means when the GDP of a nation is lower than the full employment level of GDP.…
Q: If the government decides to raise taxes to prevent inflation, this is an example of a) monetary…
A: Inflation can be combated by decreasing the aggregate demand.
Q: How does the sensitivity of investment to changes in the interest rate affect the amount by which…
A: The process by which the monetary policy affects aggregate demand and the inflation rate is referred…
Q: Which of the following is NOT an example of monetary policy to restrict aggregate demand? a)Raising…
A: In an economy, central bank uses different ways to influence aggregate demand according to the need…
Q: Give two reasons why monetary policy might be better at closing an expansionary gap than fiscal…
A: Monetary policy:- These are the policy measures that are being taken introduced by the central bank…
Q: In the long run, a change in monetary policy will affect only the aggregate price level. True or…
A: The aggregate price level alludes to the general or total cost of the aggregate labor and products…
Q: If a recession persists due to nominal wage and price stickiness (i.e., slow adjustment of nominal…
A: Answer- Need to find- If a recession persists due to nominal wage and price stickiness (i.e., slow…
Q: Can you explain, using our general equilibrium theory in the IS-LM and AD-AS curves, why the…
A: IS-LM curve: The IS-LM model depicts how the money and product markets interact to produce an…
Q: Using economic concepts, discuss the impact of the following events on the equilibrium price level…
A: Suppose the economy is at equilibrium where AD and AS intersects each other. The equilibrium output…
Q: Governments are responsible for maintaining full employment, price stability, and economic growth –…
A: Stimulative monetary policy of united states is the monetary policy in which policy is adjusted…
Q: Explain how monetary policy affects real output in a small open economy with flexible exchange…
A: The monetary policy would result in the instruments which deals with the money supply in the…
Q: Answer the following guide questions. Based on the graph above. a.What happens to the aggregate…
A: Lowering of interest rates by the BSP will induce more money supply in the economy. As money supply…
Q: How does restrictive monetary policy affect the level of investment and consumption? Explain your…
A: The IS curve is a downward sloping curve, which reflects a negative relationship between the…
Q: The latest residential property price data from the Australian Bureau of Statistics show that…
A: monetary policy is the action taken by country's central bank in order to stabilise the money supply…
Q: If a recession persists due to nominal wage and price stickiness (i.e., slow adjustment of nominal…
A: Answer: Correct option: (D) expansionary monetary policy Explanation: In the case of a recession,…
Q: Cite one limitation of monetary policy and make recommendation to address it.
A: Concept The central bank's monetary policy is the central bank's macroeconomic policy. It is a…
Q: Using the aggregate demand-aggregate supply diagram, graphically illustrate and explain the impact…
A: An expansionary monetary policy increases the money supply in an economy which leads to increase in…
Q: In the short run, expansionary monetary or fiscal policy is expected to O increase; decrease.…
A: Expansionary monetary policy is implemented by the central bank to increase the money supply via…
Q: In country A, all wage contracts are indexed to inflation. That is, each month wages are adjusted…
A: (Q) In country A, all wage contracts are indexed to inflation. That is, each month wages are…
Q: Following the economic boom in Australia in 2004, the Reserve Bank and the government adopted a…
A:
Q: When monetary policy alters the monetary base the money supply and interest rates will decrease it…
A: Nominal GDP=velocity of money x money supply Here if the money supply increases then the velocity of…
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- Explain and demonstrate graphically that if the central bank pursues targeting the interest rate, it is likely to lose control over a monetary aggregate. Include correctly labled diagrams.Based on the graphs, use one of the three traditional monetary tools to explain how to closerecessionary and, also, inflationary gaps.By using aggregate demand (AD) and aggregate supply (AS) curves show and explain how anexpansionary monetary policy can cause only an increase in the overall price level when theeconomy is operating (at equilibrium) on LRAS curve
- Question Two As an investment advisor, you have been requested to advise a client on whether he should invest his ten million dollars in Zambia or in South Africa. What key theory would you apply to advise the client on the short term and medium term implications of investing locally and abroad? The Government of Zambia has decided to pursue a dual mandate of price stability and economic growth in the conduct of monetary policy. Advise on the possibility of the country achieving both price stability and economic activity stability in the case of a temporary supply shock. Ensure to demonstrate this with the aid of the Aggregate Demand and Aggregate supply framework.Discuss the main unconventional monetary policy tools. Give examples of central bank policies from around the world for each of your arguments. Discuss what will happen to the value of the pound in the short run and in the long run if the Bank of England lowers interest rates to reduce unemployment Discuss the effects that COVID-19 may have had on the money multiplier. Give at least two examples of central bank policies around the world undertaken to mitigate such effects (give references to the appropriate media sources for your examples)Other things equal, an expansionary monetary policy will shift the economy's aggregate demand curve to the right. True or False
- What is an open market operation? How can a central bank adopt an openmarket operation to increase the growth rate of her money supply? Usingrelevant Classical Theories, explain the long run effects on the inflation rateand nominal interest rate.What specific tools did the Germany government use to conduct the monetary policy during the time of Global Financial crisis? What was the stance the Germnay government adopted? Based on data/statistics/evidence/references, was the government successful in containing the crisis? Why or why not? Provide clear explanations. You may use the money market to complement your AD/AS analysis to demonstrate the impacts of the applied monetary policy.Consider the monetary intertemporal model. Payments can be made with either credit cards or with money, and we denote the amount of transactions in real terms with credit cards as X. The bank is willing to supply credit card services as a function of Xs(q) where q is the cost per unit of credit. The money supply is given by Ms and the goods market and the labour market are as we described in the real intertemporal model Assume that the government introduces a tax on credit card services. That is, if a consumer or a firm holds a credit card balance of X, they are taxed tX where t is the tax rate. Determine the effects on the equilibriums price and the quantity of credit card services, the demand for money, and the price level
- The term "Long-Run", used in the context of the IS-MP-AS-AD model refers to the amount of time such that ... Group of answer choices monetary policy plays no role in the determination of aggregate output. only transitory deviations of labour productivity from its trend matters for the determination of the natural level of output. monetary policy has had enough time to respond to unanticipated events that buffer the economy and aggregate output returns to its natural level.. expectations about inflation have been fully incorporated into the wage-negotiation process.we make use of the general monetary model here, where L is no longer assumed constant, and money demand is inversely related to the nominal interest rate. Recall from that earlier question inflation rate in Korea is = 10% and inflation rate in Japan is = 0%. In addition, assume that the bank deposits in Japan pay 2% interest rate (i¥ = 2%). Compute the interest rate paid on South Korean won deposits (iwon). Using the definition of the real interest rate, show that the real interest rate in South Korea (rwon) is equal to the real interest rate in Japan (r¥) Suppose the Bank of Korea decreases the money growth rate from 15% to 10% and the inflation rate falls proportionately (one for one) with this decrease. If the nominal interest rate in Japan remains unchanged, what happens to the interest rate paid on Korean won deposits? Using time series diagrams (impulse graphs), illustrate how this decrease in the money growth rate affects South Korea’s…Suppose the economy begins at full employment. Label this starting point as point "1." Then, suppose that, due to increased instability in the financial markets, a decrease in investor and consumer confidence occurs. Show the effects on your graph and label the new equilibrium point "2." Lastly, suppose the Federal Reserve wants the economy to return to full-employment as quickly as possible. Should the Fed intervene? If so, show the impact of successful monetary policy on your graph. Label this new equilibrium point "3."
