Examine the effectiveness of monetary policy (expansionary and contractionary) on Price and output in the short run and long run in AD-AS Model. Add relevant graphs to complete the answe
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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.
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Q: a) Consider an AD-AS model with Static Expectations. Show how changes in monetary policy generate…
A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
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Q: Suppose the economy is at its long- run equilibrium when there is a sudden tightening of monetary…
A: Answer-
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Q: AD, AD, AS Real GDP AD, \AD, AS Real GDP Price level Price level
A: As shown in the diagram when the government increases the money supply the aggregate demand curve…
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Examine the effectiveness of
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- Using the dynamic AD-AS analysis, show the effect of contractionary monetary policy.Using the AD-AS model, draw a graph and explain the effect of the implementation of a restrictive monetary policy on the equilibrium price level and the equilibrium level of output.Suppose pessimism about the future makes household consumption plummet. How would this affect the AD-AS model in the short-run, and what monetary policy could be implemented to stabilize this fluctuation? Illistrate on a diagram if possible.
- Elaborate on the impact of a central bank's reduction in interest rates using the AD-AS model.Suppose the Fed has observed the economy is experiencing Demand-Pull inflation and a positive output gap. Discuss the monetary policy process and tools that can be used to address an inflationary output gap. Depict graphically the impact of these policy actions in the AD-AS model. What happens to the equilibrium price level and output level? This question requires graphing, graphs may be produced digitally or simply hand-drawn, photographed, and attached with assignment submission.In the monetarist version of the AD-AS framework, a decrease in velocity of money produces a ________________ shift of the _________ curve. Group of answer choices rightward; Ms (Money Supply) leftward; AD (Aggregate Demand) rightward; AS (Aggregate Supply) rightward; AD (Aggregate Demand)
- By using aggregate demand (AD) and aggregate supply (AS) curves, show and explain the effects of an anticipated increase in money supply on macroeconomic equilibrium according to Rational Expectations Hypothesis.Show using an aggregate supply and demand curve diagram, how an initial increase inaggregate demand though monetary policy may have no effect on output if workers with“rational expectations” seek wage rises to compensate for the expected higher price level.Use an AD-AS framework to show the effect of monetary restriction on the output level, prices and interest rate in the short run and the long run.
- Suppose the target rate of unemployment is 5 percent but the actual rate of unemployment is 2 percent. Given this information, which of the following policies is the least appropriate according to the AS/AD model? A, contractionary monetary policy B. an increase in the value of the dollar to decrease exports C. an increase in interest rates from the central bank D. None of the available answers. E. expansionary monetary policySuppose an economy is hit by natural disaster and its natural resources decreases. Show graphically using AD-AS model how the price level and output are affected in the short-run. Can the government use monetary policy to offset the effects on both price level and output simultaneously, explain?The AS/AD (Aggregate Supply/Aggregate Demand) model is used for policymaking. Using the AS/AD model, graphically illustrate and describe the effect of an Expansionary Monetary Policy by the MPC (Monetary Policy Committee) by decreasing the repo rate.
