Dynamic aggregate demand (AD) can be derived using the quantity theory of money. Label the equation so that it accuratelyexpresses the quantity theory of money in dynamic formgrowth in the money supply -+Answer Bankunemploymentgrowth in velocityinflationreal economic growthmarginal propensity to saveSuppose that the velocity of money is stable, 4% real economic growth is occurring, the rate of inflation is 4%, unemploymentis 5.3%, and the marginal propensity to save is 3%. By how much is the money supply growing? Enter your answer asa percentage.

The quantity theory of money:The quanity thory of money equation can be written as follows:

Answered: Dynamic aggregate demand (AD) can be…

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

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Chapter16: Monetary Policy

Section16.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 3SQP

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The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?
3)Show and explain the effects of an increase in aggregate demand in the long-run and short-run by using AD–AScurves.2)Show and explain by using a graph, what will happen to the price level and real GDP if the quantity of moneyincreases and the increase is not anticipated; that is, the price level is not expected to change.1)By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of ananticipated increase in money supply on macroeconomic equilibrium according to Rational ExpectationsHypothesis.
Suppose in the real business cycle model that there is a simultaneous temporary increase inboth current government spending and in the current money supply. Draw diagrams for thelabour, goods and money market, and the production function. Determine the equilibriumeffects of these two shocks occurring simultaneously on employment, output, consumption,investment, money, real wages, the real interest rate, and the price level. Provide a detailedeconomic analysis explaining your results with the aid of the diagrams.
The Short-Run Aggregate Supply Curve (AS) is given by: y=20pAnd the Short-Run Aggregate Demand Curve (AD) is given by: y=25,000−20p Suppose instead that the Central Bank wanted to take action to keep the price-level completely stable. This would entail keeping it constant at its current rate. Suppose also that the Central Bank targets the interest rate directly. Suppose also that: • The Marginal Propensity to Spend is 0.75. • Every 1% increase in the interest rate leads to a decrease in Autonomous Consumption of 250 and a decrease in Autonomous Investment of 250. How much would the Central Bank need to change the current interest rate in order to keep the price level from changing through the medium-term as this output gap closes in the economy?
Suppose the Federal Reserve announced that itWould pursue contractionary monetary policy toReduce the inflation rate. Would the followingConditions make the ensuing recession more or lessSevere? Explain.A. Wage contracts have short durations.B. There is little confidence in the Fed’s determinationTo reduce inflation.C. Expectations of inflation adjust quickly to actualInflation
Assume that (a)the price level is flexible upward but not downward and (b) the economy iscurrently operating at its full-employment output. Other things equal, how willeach of the following affect the equilibrium price level and equilibrium levelof real output in the short run?· An increase in aggregate demand.· A decrease in aggregate supply, with no change in aggregatedemand.· Equal increases in aggregate demand and aggregate supply.· A decrease in aggregate demand.· An increase in aggregate demand that exceeds an increase inaggregate supply.
Suppose an economy is in long-run equilibrium.a. Use the model of aggregate demand andaggregate supply to illustrate the initialequilibrium (call it point A). Be sure to includeboth short-run aggregate supply and long-runaggregate supply.b. The central bank raises the money supply by5 percent. Use your diagram to show whathappens to output and the price level as theeconomy moves from the initial equilibrium to thenew short-run equilibrium (call it point B).c. Now show the new long-run equilibrium (call itpoint C). What causes the economy to move frompoint B to point C?d. According to the sticky-wage theory of aggregatesupply, how do nominal wages at point Acompare with nominal wages at point B? How donominal wages at point A compare with nominalwages at point C?e. According to the sticky-wage theory of aggregatesupply, how do real wages at point A comparewith real wages at point B? How do real wages atpoint A compare with real wages at point C?f. Judging by the impact of the money…
COURSE: MACROECONOMICS - IS-LM MODEL Analyze and plot IN DETAIL the effect on the money market caused by an increase in the sensitivity of money demand to the level of income (i.e. "k*Y" in the equation of the money Market L = k*Y - h*i). Then, explain and plot how the equilibrium changes in the IS-LM model.
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…
In 1939, with the U.S. economy not yet fullyrecovered from the Great Depression, PresidentFranklin Roosevelt proclaimed that Thanksgivingwould fall a week earlier than usual so that theshopping period before Christmas would be longer.(The policy was dubbed “Franksgiving.”) Explainwhat President Roosevelt might have been trying toachieve, using the model of aggregate demand andaggregate supply

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