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HINT: start point is the economy before the shock.
Through the view of the Keynesian Model, explain and discuss the dynamics of a negative
(i) the short-run
(ii) the long run
Step by step
Solved in 4 steps with 2 images
- Assume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affected Explain clearly in words the reasons behind the effects on Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply, as pointed out inAssume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affectedIn the New Keynesian Model, assume that the goal of The Fed is to keep unemployment as low aspossible. What is the appropriate response to a negative real shock? a.Increase the money supply, shifting DAD to the left b.Buy bonds, shifting DAD to the right c.Sell bonds, shifting DAD to the left d.Decrease the money supply, shifting DAD to the left e.None of the above
- ssume that the Australian economy originally starts at the long-run equilibrium. The shock in focus is the introduction of robots to undertake manual tasks and replace low-skilled workers. In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia. Required: Considering the shock above, point out how Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply will be affected Explain clearly in words the reasons behind the effects on Aggregate Demand, Short-run Aggregate Supply and Long-run Aggregate Supply, as pointed out inWhat is the fundamental tradeoff faced by The Fed when responding to a negative real shock? (Three sentences or less)c. If monetary and fiscal policy do not react to the shock, which of the following best describes the economy's adjustment process to its new long-run equilibrium?
- Explain and demonstrate graphically the effects of a negative supply shock in both the short-run and long-run. (Hint: Use AD-AS framework)Refer to the Figure B. Assuming this market is representative of the economy as a whole, a negative demand shock will most likely: 1) cause inflation. 2) increase unemployment. 3) lower prices, but leave output unaffected. 4) reduce both prices and output.Which is an example of a positive supply shock? Group of answer choices: Large decrease in input prices Strong collective bargaining from unions Strict environmental protection laws Larger increase in oil prices Suppose an economy experiences a positive supply shock. What is the short-run effect on output and the price level? Group of answer choices: Output and the price level both rise. Output and the price level both fall. Output rises and the price level falls. Output falls and the price level rises.
- If a natural disaster occurs in the US, this is an example of a A) stone cold shock B) negative aggregate demand shock C) negative real shock D) positive real shock E) None of the answers are correct.If the economy begins at an equilibrium at potential output, a negative aggregate demand shock has which of the following effects in the short-ru? a. output and prices increase and unemployment falls below the natural rate b. output and prices increase and unemployment rises above the natural rate c. output and prices decrease and unemployment rises above the natural rate d. output and prices decrease and unemployment falls below the natural rateGraphically show the impact of a tax cut shock. Include all three markets: Labor, Product, Capital. Start with an initial steady state. Show the impact of a shock in the initial market. Next show the propagation mechanism--how it carries over into the other two markets. Show at least one set of the feedback loop, Show the new steady state.
