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- “Households decide to save a larger share of their income will shift aggregatedemand curve upward because higher saving will boost investment which inturn increase the demand for investment goods.” Do you agree with thestatement? Explain your choice. e. Graphically derive short run Phillips curve with the help of aggregate demand and supply model.Q22) What is the Phillips curve consistent with? Option the AD shifting along a stationary SRAS the AD shifting along the LRAS the LRAS shifting along a stationary AD the SRAS shifting along a stationary ADgiven the graph and The current target inflation rate in 8 percent. The natural rate of unemployment is 5 percent and Okun's alpha is 8. Suppose that investment spending by business firms increases causing the AD function to shift to the right by 3,000 units. what will the inflation rate be? what will short run real gdp be? what will cyclical unemployment be? what will overall unemployment be? what will the long term inflation rate be?
- Assume, while an economy is in long-run equilibrium, an adverse supply shock occured, suchas energy prices have incrased. The central bank decides to accommodate this shock and restores theequilibrium quickly. What would be the effect of this policy action on inflation? Explain and illustratewith the help of an AD-AS diagram.Assume that the cconomy of Country X his an actual unemployment rate of 7%, a natural rate of unemployment of 5%, and an inflation rate of 3%. Using the numerical values given above, draw a correctly labeled graph of the short-run and long-run Phillips curves. Label the current short-run equilibrium as point B. Plot the numerical values above onthe graph. Assume that the government of Country X takes no policy action to reduce unemployment. In the long run, will each of the following shill to the right, shift to the left, or remain the same? (i) Short-run aggregate supply curve. Explain. (ii) Long-run Phillips curve Identify a fiscal policy action that could be used to reduce the unemployment rate in the short run. Draw a correctly labeled graph of aggregate demand and short-run aggregate supply, and show the impact on the equilibrium price level and real gross domestic product (GDP) of the fiscal policy action identifiedAggregate demand function is given by Y=7000-20P; the short-run aggregate supply function is given by Y=6000+5(P-Pe). The economy was in equilibrium when the government unexpectedly increased its spending which led to a shift of the aggregate demand curve to Y=7500-20P. What's the rate of inflation? Please illustrate the calculations by means of an AS-AD graph.
- A government is considering introducing a new trade policy that would rescind existing free trade agreements and impose import tariffs. -what effect would this have on natural unemployment rate -whould this shift the phillips curve up or down?Determine the impact of an increase in inflation expectations on output and inflation in the short-run and long-run. (Use AS-AD-LRAS curves to illustrate your reasoning).Aggregate demand function is given by Y=7000-20P; the shirt-run aggregate supply function is given by Y=6000+5(P-Pe). The economy was in equilibrium when the government unexpectedly increased its spending which led to a shift of the aggregate demand curve to Y=7500-20P. What's the rate of inflation? Please illustrate the calculations by means of an AS-AD graph.
- Hi, could you help me solve this problem? Consider an increase in global oil and gas prices from the point of the euro area (that does not produce much oil or gas itself). Think of this shock as a supply shock and use the AD-AS -model to explain how it is likely to affect output (or unemployment) and inflation. How does your result relate to the original Phillips curve? Your answer should include a graph and a short explanation in words.Assume the economy of Country X is operating above its full-employment output level. Using a correctly labeled graph of aggregate demand, short-run aggregate supply, and long-run aggregate supply, show the short-run equilibrium, labeling the equilibrium price level as PLe and the equilibrium output as Ye. Draw a single correctly labeled graph and show both a short-run and a long-run Phillips curve. Identify a point that could represent the short-run equilibrium in part (a) and label it as Z. Assume that the central bank of Country X wants the economy to be in full-employment equilibrium. What open-market operation should the central bank initiate? Given your answer in part (c), what will be the effect of the central bank’s open-market operation on each of the following in the short run? The nominal interest rate Employment. Explain. Assume that the real interest rate increases in Country X. Will the international value of Country X’s currency increase, decrease, or…a) Are the effects of an increase in aggregate demand in the AD-AS model consistent with the Phillips curve? Explain. b. Discuss the factors determining the slope of the short-run Phillips curve. Is the linear shape appropriate? Why or why not?