In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor demand curve? How about an increase in taxes?
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In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor
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- In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor demand curve? How about an increase in the money supply?In the Keynesian model in the short run (IS-LM Framework), what is likely to happen to employment after each of the following shocks, based on the effective labor demand curve? An increase in consumer spending generated by a reduced desire for saving.In the IS/LM model, there is a labour market depiction full employment a Keynesian type model output is determined by real supply side factors price and wage flexibility
- The argument that the nominal wage is fixed because of long-term labour contracts is made by A. proponents of Keynesian sticky wage models, and is generally not questioned by critics of those models. B. proponents of menu cost models, but critics argue that these models do not take explicit account of the reasons that firms and workers write such contracts. C. proponents of menu cost models, and is generally not questioned by critics of those models. D. proponents of real business cycle models, but critics argue that these models do not take explicit account of the reasons that firms and workers write such contracts. E. proponents of Keynesian sticky wage models, but critics argue that these models do not take explicit account of the reasons that firms and workers write such contractsWe have discussed two models that describe the relationship between inflation and economicgrowth. Which of the following is a property of the New Keynesian Model but NOT the RealBusiness Cycle (RBC) Model?a.Monetary policy has no effect on long run economic growth b.Recessions can be caused by a fall in aggregate demand. c.Prices are fully flexible in both the short and long run. d.All the above are properties of the RBC model. e.None of the above are properties of the New Keynesian model.Empirical studies that have examined the longer-term effects of increasing the minimum wage Find more significant long-term effects because new firms are in a better position to choose labor-saving technology than existing firms Have been criticized for failing to control for dynamic shocks to the economy over the long run Conclude that the short-term effect is no different from the long-term effect Find more negative employment effects in the short-term than in the long-term
- Which of the following describes the use of Keynesian macroeconomic policy to resolve an inflationary gap problem in the economy? a) Unemployment, resulting from the short-run product markets equilibrium being below Long-run Aggregate Supply (LRAS), causes wages to decline, which increases short-run Aggregate Supply (AS), until long-run equilibrium is attained at full employment level of income and a lower price level. b) Government spending is increased, increasing Aggregate Demand (AD) to a level sufficient to attain long-run equilibrium at full employment level of income and a higher price level. c) In attempting to produce beyond the economy's natural level of GDP, producers bid up wages and prices of other resources, causing the short-run Aggregate Supply (AS) to decrease to the point where long-run equilibrium is restored. d) Taxes are increased reducing Aggregate Demand (AD) to a level consistent with full employment.Consider the AS-AD and three-equations models of a closed economy. Write down the expressions for the AS and AD curves and interpret the expressions: what is the intuition behind the two curves? What must be true of the model parameters and variables in the long-run equilibrium, i.e. in the steady state? Analyse the effects of an oil supply shock that causes a temporary increase in inflation, using the three-equation model. Assume that the shock lasts for one-period and then assumes the value 2%. Describe the mechanisms that bring the economy back to long-run equilibrium. What happens to aggregate demand? Consider an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. Analyse the effects of a decrease in the inflation target from ? to . Explain the mechanisms behind the adjustment to the new steady state.Consider starting from full-employment equilibrium in our Aggregate Demand and Supply model (with flexible wages and worker misperception of price level changes in the short run), at Po, QN on the output market graph below. Then we get an increase in Aggregate Demand from Agg Do to Agg D1. Group of answer choices a) In the long run, P will increase further above P1 as workers finally get a full cost of living raise. b) at P1, Q1, we are in a recessionary gap. c) In the long run, P and Q will return to their original levels when workers perceive the decrease in P. d) In the long run Q will increase further above Q1 as employment increases (due to workers getting wage increases). e) None of the other options.
- Macropoland, a country that is a natural gas and oil importer, has a natural rate of unemployment (at the full employment level of GDP) that is about 4.5%, and the long run average rate of inflation over time has been about 2%. However, during the period 1973-1974, the country experienced an inflation rate of about 15% while simultaneously experiencing unemployment of nearly 13%.At the present time, Macropoland is experiencing very sluggish consumption and investment (a result of a fall in the housing market), and unemployment has again edged up to around 9%. Inflation is very low at 0.4%.Macropoland has just hired you as their economic advisor. You have a big job ahead of you. Using your knowledge of aggregate demand and aggregate supply, can you explain what happened in these two time periods?Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical…Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run. (Hint: Use AD-AS framework)According to the Keynesian model, demand shocks affect output in the short run because: nominal wages are sticky. employment can be adjusted quickly. real wages do not change as inflation changes. None of the above.
