In 2020, to soften the negative impact of the COVID-19 recession, the U.S. government spending relative to the US GDP shot up to 49.6%, compared 7.5% in 2019. The short run effect of this policy was ...
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In 2020, to soften the negative impact of the COVID-19 recession, the U.S. government spending relative to the US
Group of answer choices Increase real GDP Y and increase the price level P, due to a rightward shift of the Short-Run
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- Case 3: Combating the Corona Crisis The Covid-19 induced economic recession is said to be caused by both, a negative demand shock and a negative supply shock. Task 1 What is the difference between a negative demand and a negative supply shock in terms of their impact on income and price level in the short run? Task 2 How to combat a demand shock and a supply shock, respectively? Task 3 Discuss the effectiveness of a government stimulus program depending on the relative strength of these shocks.With the onset of COVID-19, the Fed, led by Fed Chairman Jerome Powell, lowered its target interest rate (the federal funds rate) by 1.5 percentage points, to a range of 0.00-0.25 percent. This was done with 2 rate cuts during March 2020. Consider the aggregate demand-aggregate supply diagram below, which represents the macroeconomy. Suppose the market is initially (with the onset of COVID) at an equilibrium at point A. What effect will the Fed's actions have on this economy?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?
- In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answer. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. Assume that a country’s economy is in long-run equilibrium. Using a correctly labeled graph of aggregate demand, short-run aggregate supply, and long-run aggregate supply, show the short-run equilibrium price level, labeled PL1, and output level, labeled Y1. Assume that increased uncertainty has reduced business orders for equipment. What is the impact of the change in business orders on each of the following in the short run? Aggregate demand. Explain. Employment Based on the change in business orders, what will happen to the long-run economic growth rate? Explain. Using a correctly labeled graph of the loanable funds market,…Coronavirus pandemic and resultant shutdown measures to contain it have plunged the economies around the world including Singapore into severe contraction. Assuming Singaporean economy was in long run equilibrium in the aggregate demand and supply (AD-AS) model before the pandemic (and consequent shutdown) started, answer the questions below: (do not explain what the lines in the graph mean. explain the effects of the respective demand/supply side factors) a. Assuming the contraction in the Singaporean economy is mainly driven by demand side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less)(explain the demand side factors not what the lines in the graph are). b. Now assume that the contraction in the Singaporean economy is mainly driven by supply side factors, Show the short-run effects of this using the AD-AS model. Carefully explain in words (100 or less)(explain the supply side factors not what the lines in the graph are).…Please note that you are only helping me with 2.1 and 2.2 All the other quesitions are just for refrence if you need it. Thank you so much for your time! Figure 1: Hayek’s (Classical) AD-AS Model (image normally goes here) Why does Hayek’s aggregate supply curve always lead to an equilibrium level of national output equal to the full-employment level of real GDP? Hayek says that markets will heal themselves and that government should not intervene. How does the AD-AS model reflect Hayek’s idea that governments cannot increase real GDP beyond the level that the free market economy is able to produce? Do you believe that the Hayek’s classical AD-AS model explain the factors that cause changes (shifts) in AS realistically? Why or why not? Figure 2: Keynes’s AD-AS Model(Image nomrally goes here) 2.1. Changes in which factors could cause aggregate demand to shift from AD to AD1? What could happen to the unemployment rate? What could happen to the inflation rate?(In simplier…
- Which of the following would decrease short run aggregate supply? a decrease in resource costs a decrease in expected rate of inflation negative supply shocks, ex. covid-19 outbreak all of the above none of the aboveQUESTION 22 Which of the following is not true? OA. The extreme new classical aggregate supply curve is vertical. B. The extreme Keynesian aggregate supply curve is horizontal. OC. The extreme supply-side case has tax cuts shifting the aggregate supply curve leftward. D. The neoclassical synthesis has short-run upwards sloping aggregate supply curves and vertical long run aggregate supply curves. O E. The extreme Keynesian case has tax cuts shifting aggregate demand only. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.QUESTION 6 06. Which of the following statements about Keynesian policy are TRUE? Multiple answers a) Keynesian policy is most effective in the flat Keynesian (or Depression) range of the Short-Rum Aggregate Supply (AS) curve, where increases in Aggregate Demand are not likely to cause products price inflation. b) Keynesian policy is totally ineffective in the vertical Classical (past-full employment) range of the Short-Run Aggregate Supply (AS) curve, where an increase in Aggregate Demand will be completely dissipated by products price inflation. c) In the Intermediate range of the Short-Run Aggregate Supply (AS) curve, the effectiveness of Keynesian policy is partially dissipated by products price inflation. d) The Short-Run Aggregate Supply (AS) curve may will be vertical when the economy is trying to produce beyond full employment. But a vertical AS curve can also result from resource suppliers acting on inflationary expectations. This too will…
- Assume our complete 4-panel model of the economy in equilibrium at Y-full employment. If the Fed buys up government securities from the public, macroeconomists predict which one of the following? Group of answer choices a)In the long run there will be some inflation and aggregate output will eventually return to its full employment level. b)The short run aggregate demand curve shifts to the left and the short run aggregate supply curve shifts to the right. c)In the long run there will be some inflation and aggregate output will be permanently pushed above Y-full employment. d)The short run aggregate demand curve shifts to the right and the short run aggregate supply curve shifts to the right.An economy's aggregate demand curve (the relationship between short-run equilibrium output and inflation) is described by the equation:Y = 15,000 - 12,000π, where π is the inflation rate. Initially, the inflation rate is 2 percent or π = 0.02. Potential output Yp equals 14,640.Note: Keep as much precision as possible during your calculations. Your final answer for inflation should be accurate to at least two decimal places and output should be accurate to the nearest whole number.a) Find inflation and output in short-run equilibrium. Inflation : 0%Output : $0 b) Find inflation and output in long-run equilibrium. Inflation : 0%Output : $0Su In answering the question, you should emphasize the line of reasoning that generated your resultsit is not enough to list the results of your analysis. Include correctly labeled diagrams, useful or requiredin explaining your answerA correctly labeled diagram must have all and curves clearly labeled and must show directional changes. The economy Zarland is operating below the full-employment level of output with a balanced budget Draw a correctly labeled graph of short-run aggregate supply, long-run aggregate supplyand aggregate demand, and show each of the following country's current equilibrium output and price level, labeled x 3 and PL 1 , respectively The full-employment output, labeled Yf bIf Zarland increases government expenditures and taxes by equal amounts, can aggregate demand increase? Explain If Zarland decides to pursue an expansionary monetary policy, what open market operation should the central bank undertake ? d Using a correctly labeled graph of the money market…
