The following graphs show the state of an economy that iscurrently in Tong-run equilibrium. The first graph shows theaggregate demănd (AD) and long-run aggregate supply (LRAS)curves. The second shows the long-run and short-run Phìllipscurves (LRPC and SRPC).LRASADLRASAD121518OUTPUT (Trillions af dollars)LRPCSRPCLRPCSRPC1012UNEMPLOYMENT RATE (Percent)Which of the following statements are true based on thesegraphs? Check all that apply.- The current quantity of output is greater than potentialoutput.The natural level of output is $9 trillion.- The unemployment rate is currently 6% higher than thenatural rate of unemployment.Suppose the central bank of the economy increases the moneysupply.Show the long-run effects of this policy on both of the graphs byshifting the appropriate curves.in theThe long-run effect of the central bank's policy isinflation rate,real GDP.in the unemployment rate, andinINFLATION RATE

Long Run Aggregate Supply function depicts the changes in output as a function of changes in prices…

Answered: The following graphs show the state of…

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 3SQP

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If there is a oil price shock, assuming that it is a temporary phenomenon, where eventually price decline. Can anyone help me with the following qns (Using Price Level and Real GDP as the axis titles) Explain and illustrate the short-run effect of a temorary oil price shock on macroeconomic equilibrium using the AD-AS Explain and illustrate the adjustment process back to long-run equilibrium based on the following: Self-correcting mechanism (i.e., with no policy response). Active stabilisation response (i.e., with policy response). Note, there are TWO active stabilisation polices Explain both. Based on your answers in Qn 2, does the ‘divine coincidence’ hold? Where the meaning is in relation to having no trade-off between price stability and maintaining economic activity.
Suppose Chino is a closed economy. A large portion of the work force has joint astrong labor union. As such, the nominal wages of most workers are downwardrigid.Suppose most households lose their wealth in a recent clash of the stock market.How would the price and output level of Chino be affected in the short run?Explain by using the AD-AS model. Particularly, use the sticky-wage model ofaggregate supply to explain the magnitude of the effects on price and output.
MA4. 13. If the equation for a country's Phillips curve is π = 0.05 – 0.8(u – 0.05), where π is the rate of inflation and u is the unemployment rate, what is the short-run inflation rate when unemployment is 3 percent (0.03)? A) .066 B) -.056 C) -.066 D) .056 11. The aggregate supply equation is Y = Y + α(P – EP). Assume that Y is 2,000, α = 200, P = 1.12 and EP = 1.00. What is the value of Y? A) 2,232 B) 2,024 C) 2,400 D) 2,012 9. If policymakers announce in advance how policy will respond to various situations but then renege on their announcements, this a problem of: A) policy by rule. B) policy by discretion. C) time inconsistency of policy. D) monetary policy. 10. According to the sticky-price model, output will be above the natural level if: A) firms expect a high price level and the demand for goods is high. B) the proportion of firms with flexible prices equals the proportion of firms with sticky prices. C) the price level is above the…
An economy's aggregate demand curve (the relationship between short-run equilibrium output and inflation) is described by the equation:Y = 15,000 - 12,000π, where π is the inflation rate. Initially, the inflation rate is 2 percent or π = 0.02. Potential output Yp equals 14,640.Note: Keep as much precision as possible during your calculations. Your final answer for inflation should be accurate to at least two decimal places and output should be accurate to the nearest whole number.a) Find inflation and output in short-run equilibrium. Inflation : 0%Output : $0 b) Find inflation and output in long-run equilibrium. Inflation : 0%Output : $0
Consider a closed economy that begins with her long run equilibrium.Recently, households become more pessimistic. They tend to save more to getprepared.Adopt the sticky-wage model of the short run aggregate supply to explain theshort run effects of this shock. Also, explain the gradual long run adjustmentsover time using the sticky-wage model of the short run aggregate supply. Assume the policymakers do not accommodate the shock.
Which of the following would cause a decrease inthe short-run aggregate supply curve (SRAS)?a. An increase in oil pricesb. An advance in technologyc. An increase in the CPId. An increase in the long-run aggregate supplycurve (LRAS)
Suppose that the negative shock is long-lasting (i.e., the AD curve stays at AD'). Please explain in words how the economy evolves from Point B to the medium-run equilibrium.
Explain why the U.S. economy was able to aciheve full employment with relative price level stability between 1996 and 200 even though we had increases in aggregate demand that would have pushed us past full-employment and normally caused high inflation.
Suppose the president gets Congress to pass legislationthat encourages investment in research and the development of new technologies. Assuming this policy leadsto a positive productivity change for the U.S. economy,use aggregate demand and supply analysis to predictthe effects on inflation and output. Demonstrate theseeffects on a graph.
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?
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…
Derive the Phillips Curve from the Short Run Aggregate Supply (SRAS) Curve and discuss the relevance of their relationship for the Ghanaian economy.

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