Select all that apply. Suppose there is a positive AS shock that does not change potential output. Then the Fed could a Select one or more answers and submit. For keyboard navigation... SHOW MORE ✓ b EOC 12.9 Homework Unanswered Due Today, 9:00 PM с d Multiple answers: Multiple answers are accepted for this question raise rates to close output gap raise rates to stabilize prices lower rates to stabilize prices lower rates to close output gap

Select all that apply. Suppose there is a positive AS shock that does not change potential output. Then the Fed could a Select one or more answers and submit. For keyboard navigation... SHOW MORE ✓ b EOC 12.9 Homework Unanswered Due Today, 9:00 PM с d Multiple answers: Multiple answers are accepted for this question raise rates to close output gap raise rates to stabilize prices lower rates to stabilize prices lower rates to close output gap

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter14: Money And The Economy

Section: Chapter Questions

Problem 3WNG

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Similar questions

Suppose the Federal Reserve announced that itWould pursue contractionary monetary policy toReduce the inflation rate. Would the followingConditions make the ensuing recession more or lessSevere? Explain.A. Wage contracts have short durations.B. There is little confidence in the Fed’s determinationTo reduce inflation.C. Expectations of inflation adjust quickly to actualInflation
The Fed’s target for the federal funds ratea. is an extra policy tool for the central bank, inaddition to and independent of the money supply.b. commits the Fed to set a particular money supplyso that it hits the announced target.c. is a goal that is rarely achieved because the Fedcan determine only the money supply.d. matters to banks that borrow and lend federalfunds but does not influence aggregate demand.
1) Brief explain the reasons for the Great Recession of 2008 and 2009. 2) How do the recession shocks affect IS curve and LM curve? How does it affect interest rate r, price and output Y in the short run and long run? Please use figuresand words to illustrate your explanation. 3) How does government or Fed recover the economy in the short run. Please usefigures and words to illustrate your explanation.
1) Inflation in Theoretica is currently below the target range of its central bank. What does this tell you regarding Theoretica’s likely output gap? Illustrate it using an AS-AD diagram, and briefly explain your diagram 2) Your mother states that lowering interest rates in the recessionary COVID-19 period is good policy because it will guarantee consumers will spend more as it is cheaper to borrow money. Do you agree or disagree with her statement? Provide two reasonings to justify your answer. 3) Is either helicopter money or quantitative easing preferred in times of severe recessions in order to boost economic activity? Explain your reasoning.
We are in eqm in the full SR model, IS-LM. Following a single shock (so that only one curve shifts), cet. par., we see that the nominal interest rate has fallen and Y has risen then we know with certainty that the Fed has engaged in expansionary policy. True, False, or Uncertain? Show graph in i-Y space and explain fully.
The Fed is fighting recession and it happens to overstimulate the economy. If the expected inflation rate rises above the 2 percent goal, what is the cost of returning the inflation rate back to its goal? The cost of returning the inflation rate back to its goal is _______. A. an inflationary gap and an even higher inflation rate than initially B. unemployment below the natural unemployment rate C. a decrease in potential GDP and aggregate supply D. a recessionary gap and a higher unemployment rate Thanks!
b) use the "Lucas Island Model" to provide an explanation as to why money is leading and pro-cyclical according to the New Classical Economists. Be sure to include a completely labeled AS/AD diagram and an explanation of what we mean exactly by a Lucas Aggregate supply curve (along with the intuition underlying it). Finish your essay by discussing whether or not money is neutral in this New Classical model and why. ANSWER I WROTE The Lucas Island Model retains the assumption of rapid market clearing despite being based on incomplete information. The Lucas Island Model makes the same assumption as the traditional model that the money supply will rise before prices start to rise. Take a person, let's say a tailor. After observing the fabric market for some time, the tailor detects a rise in the cost of cloth. He believes that the relative price of cloth has increased because he is unaware of what has occurred to the prices of all other commodities, which is what we refer to as price…
The Fed is fighting recession and it happens to overstimulate the economy. If the expected inflation rate rises above the 2 percent goal, what is the cost of returning the inflation rate back to its goal? The cost of returning the inflation rate back to its goal is _______. A. an inflationary gap and an even higher inflation rate than initially B. unemployment below the natural unemployment rate C. a decrease in potential GDP and aggregate supply D. a recessionary gap and a higher unemployment rate
1. Assume that a country’s economy is in a short-run equilibrium and the actual unemployment rate is lower thanthe natural rate of unemployment.(a) Using a correctly labeled graph of the long-run aggregate supply curve, short-run aggregate supply curve,and aggregate demand curve, show each of the following.(i) Current price level, labeled PL1, and current output level, labeled (b) What open-market operation can the country’s central bank use to move the economy toward its long-runequilibrium?(c) Use a correctly labeled money-market graph to show how the country’s central bank action to move theeconomy toward its long-run equilibrium affects the equilibrium nominal interest rate in the short run.(d) Based on the interest rate change from part (c), will each of the following increase, decrease, or remain thesame in the short run?(i) Real output. Explain.(e) Assume instead that the central bank does not pursue the monetary policy action from part (b) and there wasno other government…
The Fed's target for the federal funds rate A)is a goal that is rarely acheived because the fed can determine only the money supply B) is an extra policy tool for the central bank, in addition to and independent of the money supply C) commits the fed to set a particular money supply so that it hits the annouced target D) matter to banks that borrow and lend federal fund but does not influence aggregate demand.
Assume that as a consequence of an IS shock the economy is initially at a point with output above equilibrium (y > ye), and inflation of 4% above a 2% target. By means of a diagram, explain how the central bank will respond to this new information about economic conditions and discuss the effects on the economy.
1. If LRAS = $500 billion, RGDP = $700 billion, and MPC = .8, then what should the Fed do? Be specific and list all three options. Also draw and label both the current situation and what would occur as the government impacted the economy through their actions. 2. What are the impacts in the short run of the above actions on the following: the market interest rate, the quantity of money demanded, investment spending, aggregate demand, potential output, the price level, and equilibrium RGDP.