In the RBC model, assume we start from a point of long run equilibrium, then the effect of the natural disaster in 11 ripples through the macro economy and the central bank decides to increase the money supply. Which of the following are true? (choose all that apply).A) Long run growth will return to pre-disaster levels once the money supply increase takes place.B) Inflation rates will continue to fallC)Inflation rates will continue to riseD)Inflation rates will be higher than if the central bank did nothing in response to the shock.E)The central bank cannot increase money supply after disaster occurs.

Question
Asked Jun 11, 2019
12 views

In the RBC model, assume we start from a point of long run equilibrium, then the effect of the natural disaster in 11 ripples through the macro economy and the central bank decides to increase the money supply. Which of the following are true? (choose all that apply).

A) Long run growth will return to pre-disaster levels once the money supply increase takes place.

B) Inflation rates will continue to fall

C)Inflation rates will continue to rise

D)Inflation rates will be higher than if the central bank did nothing in response to the shock.

E)The central bank cannot increase money supply after disaster occurs.

check_circle

Expert Answer

Step 1

The correct options are A an...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Growth Models

Related Economics Q&A

Find answers to questions asked by student like you
question_answer

Q: Suppose that the dynamic aggregate demand curve in Swaziland is determined by the equation M + U-6%....

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

question_answer

Q: Does the fact that your bank keeps only a fraction of your account balance in reserve worry you? Why...

A: Step 1The bank is a financial institution that focuses on accepting the deposit and making progress ...

question_answer

Q: Matt Christopher is a 25-year-old mechanical engineer, and his salary next year will be $60,000. Mat...

A: Fr computing the savings made in each year, the salaries received in respective years is computed by...

question_answer

Q: In Country Faraway, cigarettes are forbidden, so people trade cigarettes in a black market. The ciga...

A: We are given the demand and supply of cigarettes as follows:QD = 12 − PQS = 2P Demand: Demand of a g...

question_answer

Q: Suppose The Fed lowers the reserve ratio requirement for banks to increase the money supply in an ec...

A: The correct answer is C.

question_answer

Q: Suppose that a nation decides to introduce a new income tax system with the tax brackets shown in th...

A: Since you have not mentioned the sub-parts you need help with and since we are entitled to answer up...

question_answer

Q: Lou's preferences over pizza (X) and other goods (y) are given by U(X,Y)=XY^2 with associated margin...

A: Utility:The utility is the power or capacity of the goods and services to satisfy human wants, it is...

question_answer

Q: 7) Explain the slopes of the supply and demand curves in the federal funds market.  Show and explain...

A: Federal fund rate: It is the interest rate at which banks and other depository institutions lend to ...

question_answer

Q: Year Nominal GDP Price Level Population 2011 $3,000 $100 5 2014 $8,000 $200 ...

A: Real GDP:2011 Real GDP can be calculated as follows:

question_answer

Q: Which of these situations would give rise to the free-rider problem? ltems (6 items) (Drag and drop ...

A: Free rider prolem arises due to high consumption of a good or services.  It is condition when any pe...

question_answer

Q: Housing prices have been increasing in much of the U.S.  For most people, their home is their single...

A: It is given that housing prices are increasing in US. Let us first discuss the determination of hous...

question_answer

Q: There are several ways that governments can increase or decrease the money supply. Match the descrip...

A: Money supply is the stock of money in circulation in an economy in a given time period.Open market o...

question_answer

Q: If you are the manager of a perfectly competitive firm that is making a loss (TR < TC), would you...

A: Any manager worth his salt would aspire to maximize profits and minimize losses.  When the total rev...

question_answer

Q: 13 If a 10% decrease in the price of gas causes a 30% increase in the demand for standard sized auto...

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any spec...

question_answer

Q: Debt is    the same as the deficit.   good if it increases productivity more than the debt ...

A: Debt is the term for the government borrowings accumulated over a period of time. Government borrowi...

question_answer

Q: please help

A: Profit maximization requires price of inputs to be equal to value of Marginal product of inputsP * M...

question_answer

Q: Explain what is meant by opportunity cost of choice

A: The Opportunity cost of alternative is the benefits that has to forego which are available to us fro...

question_answer

Q: What issues are at stake with net neutrality?   Use Theory from any of the below non-market analysis...

A: Step 1Network neutrality or in the simple words is called as a net neutrality, which is governed by ...

question_answer

Q: If television sellers expect the prices of televisions to fall in the future, we are likely to see t...

A: When the future expectation of sellers is that the price of product will fall, they will try to sell...

question_answer

Q: Suppose the accompanying graph depicts a monopolistically competitive firm earning positive economic...

A: It is given that the following graph belongs to a monopolistically competitive market that earns a p...

question_answer

Q: 14 If the price elasticity of demand of for gasoline is 1.8, then a 15% decrease in quantity demande...

A: Price elasticity of demand (PED or Ed) shows the responsiveness or elasticity about the quantity dem...

question_answer

Q: Mary can wax 6 cars per day or wash 4 cars per day and John can wax 3 cars per day or wash 3 cars pe...

A: Opportunity Cost: the opportunity cost of any goods and services is the cost of other goods and serv...

question_answer

Q: 9. True or false? If the statement is false, explain why: LO4 a. An internally held public debt is l...

A: a. The given statement is true in the case of nation debt held internally with specific amount. IF t...

question_answer

Q: 1.Which of the following increases aggregate supply to the right?depleting natural resourcesmore mon...

A: The shift in Aggregate supply to the right means the increase in Supply in the economy.This is due t...

question_answer

Q: in International trade about tariff: using a simple Swiss formula to calculate the final tariff: ini...

A: The Swiss formula for calculating final tariff rate is given below.

question_answer

Q: If the reserve ratio requirement in the banking system is 7 percent, what is the money multiplier? A...

A: Money multiplier:Money multiplier can be calculated as follows:

question_answer

Q: How do you do number 3

A: STEP 1It is given that,The above table depicts the demand and cost structures of foreign language tr...

question_answer

Q: Why are monopolies for the most part illegal?

A: Monopoly Market: Monopoly market refers to the market situation where a single firm enjoys the large...

question_answer

Q: Donna and Jim are two consumers purchasing strawberries and chocolate. Jim’s utility function is U(x...

A: MUx (for Jim) = y MUy (for Jim) = xPx = $2     and  Py = $4   ( as given in another subpart of quest...

question_answer

Q: 1. The Fed's job in manipulating monetary policy is made harder by the fact that: A) monetary author...

A: Answer 1: The correct option is C. Reason:The central bank of the U.S. (fed) aims at manipulating th...

question_answer

Q: In​ Korea, real GDP per hour of labor is​ $22, the real wage rate is​ $15 per​ hour, and people work...

A: Korean marketThe given information:Real GDP per hour of labor is $22The real wage rate is $15 per ho...

question_answer

Q: How relevant is economics in our everyday lives?

A: Economics is very important and useful to study to make it applicable in our daily lives. There are ...

question_answer

Q: q22-Ginger's utility function is U(x,y)=2x^2y. She has income I=2000 and faces prices Px=$20 and Py=...

A: Budget line equation can be derived as follows.

question_answer

Q: The following two linear functions represent a market (thus one is a supply function, the other a de...

A: 1.) Market equilibrium price: Equate supply and demand function to get the value of market equilibri...

question_answer

Q: explain what would happen to the ecomony if velocity is reduced sigificantly.   explain why FED chai...

A: Since we are entitled to answer one question per request, we would be answering the 1st question. If...

question_answer

Q: Use the table to answer the questions. In relation to taxes, Ramone will be filing as married filing...

A: Tax with marriage filling jointly can be calculated as follows.

question_answer

Q: What is the value of the monetary base, given that the value of deposits at all depository instituti...

A:  Monetary base:Monetary base can be calculated as follows:

question_answer

Q: The tables show the spending and revenue for Littleland in 2010. Use the tables and other informatio...

A: Little land Borrow:Little land Borrow can be calculated as follows:

question_answer

Q: In​ Brazil, the reference base period for the CPI is 2000.   By​ 2005, prices had risen by 51 perce...

A: The given information:Base period is 2000In 2005 price  increases by 51%Brazil inflation rate in 200...

question_answer

Q: loui's preferences over pizza (x) and other goods (y) are given by U(X,Y)=XY^2, with associated marg...

A: The given information:

question_answer

Q: 1.Which of the following is not helpful in making something a good money?   Make it from somethi...

A: From the question, the options we have area. Make it from  something everyone values, like gold.b. W...

question_answer

Q: please help

A: Use equilibrium condition to solve for x and y in terms of prices Px and Py.

question_answer

Q: Transmission and Amplification Mechanisms-Ask FRED ALFREDi -capacity utilization: Total Industry Vin...

A: b.Transmission and amplification mechanism:From the given graph, the approximate capacity utilizatio...

question_answer

Q: Reflect on the changes in China. Can the country continue to be a manufacturing floor for the rest o...

A: In the past three decades China has revolutionized global manufacturing. There is considerable poten...

question_answer

Q: The total cost of Mr. Plow, a snow-removal business, is given in the table below. Quantity adriveway...

A: Total Profits of 5 drive ways = Total revenues of 5 driveways - Total cost of 5 drivewaysTotal reven...

question_answer

Q: How do you figure out opertunity cost?

A: Opportunity cost refers to the cost of the next best alternative that is foregone.

question_answer

Q: What is an isoquant? What is a marginal product? What is the technical rate of substitution? Explain...

A: Utility: The utility is the power or ability of the goods and services that satisfy the consumers wa...

question_answer

Q: What are the personal, economic and social consequences of unemployment?

A: Let us discuss certain concepts related to unemployment:Labor force: In an economy, labor force refe...

question_answer

Q: (Table: Balance Sheet) Refer to the information in the tableBalance Sheet. If the reserve ratio is 2...

A: Total deposit:Total deposit can be calculated as follows.

question_answer

Q: In the quantity theory equation (in terms of growth rates), we have , where is the inflation rate, i...

A: Assume that,P = Inflation rate / Price levelM = Money supply,V = Velocity, and Y = GDPTherefore, Acc...