Use the extended IS-LM model graph to show where the US economy is functioning now given that the current u is 7.9% and the full-employment (FE) u (aka un) is 4%. [Hint: if u > u FE then Y< Y FE.] Indicate the gap and provide its name.Let’s assume that a “second covid-19 wave” in December 2020 leads to more lockdowns, so that many more businesses struggle to survive and face an increase in their probability of bankruptcy. What is this “shock” and what would it do, cet. par., to your graph of part a.? Explain any shift(s). Let’s assume the Federal Reserve fixes the gap in your graph of part b. Provide appropriate name(s) and policy tools and show what will happen in your graph of part b. What role, if any, does the “zero lower bound” play?

"Since you have asked multiple questions, we will answer only first question for you. If you have…

Use the extended IS-LM model graph to show where the US economy is functioning now given that the current u is 7.9% and the full-employment (FE) u (aka un) is 4%. [Hint: if u > u FE then Y< Y FE.] Indicate the gap and provide its name.

Use the extended IS-LM model graph to show where the US economy is functioning now given that the current u is 7.9% and the full-employment (FE) u (aka un) is 4%. [Hint: if u > u FE then Y< Y FE.] Indicate the gap and provide its name.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 52CTQ: If foreign wealth-holders decide that the United States is the safest place to invest their savings,...

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Question

Use the extended IS-LM model graph to show where the US economy is functioning now given that the current u is 7.9% and the full-employment (FE) u (aka u_n) is 4%. [Hint: if u > u FE then Y< Y FE.] Indicate the gap and provide its name.
Let’s assume that a “second covid-19 wave” in December 2020 leads to more lockdowns, so that many more businesses struggle to survive and face an increase in their probability of bankruptcy. What is this “shock” and what would it do, cet. par., to your graph of part a.? Explain any shift(s).
Let’s assume the Federal Reserve fixes the gap in your graph of part b. Provide appropriate name(s) and policy tools and show what will happen in your graph of part b. What role, if any, does the “zero lower bound” play?

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