In the ADT/ASI model, the equilibrium inflation rate is O a. The target inflation rate O b. The rate that sets the real interest rate is equal to zero The rate where the unemployment rate is equal to zero O d. Zero
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- in a standard AD/AS SRAS curve is steep A permanent investment increase, that increases output potential, lead to large short term inflation incrreases but none long term Is the true or false1. Use the AD-AS model attached to explain and illustrate the difference between demand side measures and supply side measures and give an example of each. Also mention which markets are embedded within each curve. 2. Use the AD-AS model to Analyze and illustrate the short run impact of an increase in energy prices on GDP, inflation and employment. Which type of inflation is this?During July 2020, Japan’s u was 2.6%; economists have estimated that Japan’s un is 2.5%. If Japan has an accelerationist PC, what would have happened to Japan’s inflation rate during July? Explain fully by showing where Japan was functioning using the appropriate graph. Make all your assumptions clear; calculations not required.
- The CPI tracks the average change in prices of a basket of goods and services overtime, whereas the UNRATE is the percentage of the labour force that is unemployed.By examining the cointegration between these two variables, you can gain insightsinto the relationship between inflation and unemployment in the US economy. Thequarterly series is complete and seasonally adjusted. a) From a theoretical perspective, are these two series expected to becointegrated? Justify your answer. b)How do expectations about future economic conditions influence the speed ofadjustment? Are there any other factors that might affect the speed of adjustment?During July 2020, Japan’s u was 2.6%; economists have estimated that Japan’s un is 2.5%. If Japan has an accelerationist PC, what would have happened to Japan’s inflation rate during July? Illustrate fully by showing where Japan was functioning using the appropriate graph. Make all your assumptions clear.There is a persistent fear that there will be a high level of deflation. Many economists warn that it may be worse for the economy than if there is high inflation. Suppose that Herb is in debt and has to pay a 5.25% nominal interest rate. He expected inflation to be 1.50%. Instead, inflation is −2.00% (deflation). Multiple Choice Question... Because the economy is experiencing deflation of −2.00%instead of inflation of 1.50%, Herb's real interest rate, compared to what he expected to pay, has A) decreased, so Herb feels poorer. B) increased, so Herb feels richer. C) decreased, so Herb feels richer. D) increased, so Herb feels poorer.
- The real business cycle theory assumes that money wages are flexible and adjust quickly True FasleIf inflation rises unexpectedly by 5%, indicate for each of the following whether the economic actor is helped, hurt, or unaffected: a. A union member with a COLA wage contract b. Someone with a large stash of cash in a safe deposit box c. A bank lending money at a fixed rate of interest d. A person who is not due tor receive a pay raise for another 11 monthsProvide examples and explain your answer. If inflation rises unexpectedly by 5% indicate for each of the following wether the economic actor is helped, hurt, or unaffected. a. A union member with a COLA wage contract b. Someone with a large stash of cash in a safe deposit box c. A bank lending money at a fixed rate of interest d. A person who is not due to receive a pay raise for another 11 months
- Which of the following are likely consequences of rising inflation? Check all that apply. Savers wanting to save less and borrowers wanting to borrow more Savers wanting to save more and borrowers wanting to borrow less A misallocation of resources A distorted price-signaling mechanism Suppose the real interest rate (IR) is 3.5% and the inflation rate is 3.5%, and then the nominal or market interest rate is_______ . Crystal considers investing in the green energy industry and compares the following two options: 1. One-year bonds issued by Air Wizard, a producer of wind turbines based in the United States, that pay a nominal interest rate of 7% 2. One-year bonds issued by Sun Waters, a producer of solar water heaters based in Australia, that pay a nominal interest rate of 9.8% A thorough study has shown that the economic situation and prospects in the United States and Australia are very similar. Nevertheless, Crystal decides to…If the expected inflation rate is 4 percent and the nominal interest rate is 9 percent, then the ex ante real interest rateAsap plz Assuming the economy has a strong-form market and that the current economy has reached its long-term equilibrium with optimal inflation rate π = 3 (%) and the aggregate output y = 10 (£bil). The economy has the following AD-AS curves: I. AD Curve: π = 10-0.7y II. AS Curve: π = 1+0.2y III. LRAS Curve: y = 10 Now, the central bank intends to use monetary policy to boost economic growth and suggest the government to increase £1bil in government expense. You are a researcher and now reviewing effect increased expense. a. What is the short-term equilibrium of π and y? b. What is the long-term equilibrium of π and y? c. What is the new AS curve? Do you think central bank’s suggestion on monetary policy effective?