Use the Monetary Intertemporal Model that we saw in class to predict the effects of a persistent negative TFP shock on employment, consumption, investment, output, prices, real interest rate, real wage and on the average labor productivity. Detail fully, i.e. use graphs and explain your reasoning.
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- 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.Using the macro model we learned in this class (MP-IS and AD-AS framework) consider the current crisis. Consider the monetary policy responses to the covid pandemic crisis. Develop separate analysis for an economy which have positive policy rates vs an economy which is at the zero lower bound. Would it require different monetary policies? If so how? What would you expect to happen to the inflation rate, unemployment rate, and economic growth in the near future? Use graphs for each case.Use the Phelps-Friedman model to trace through the effects of a shock involving an increase in the money supply. Graphically illustrate (including an IS-LM figure) and fully explain your work.
- a. Consider a Central Bank that cares equally about inflation and output. Use the 3 equation model to consider an economy that starts out at equilibrium. Suppose the IS curve shifts temporarily to the left i.e., a temporary negative demand shock hits the economy). Describe the dynamics of the economy back to equilibrium. Draw a properly labelled diagram. plz Answer ASAP. Show all steps to help me understand it clearly. Will give u a positive rating. :)Chapter 14, Problem 5, p. 530. (not answered) In the New Keynesian model, how should the central bank change its target interest rate in response to each of the following shocks? Use diagrams and explain your results. (a) There is a shift in money demand. (b) Total factor productivity is expected to decrease in the future. (c) Total factor productivity decreases in the present Chapter 14, Problem 6, p. 530. (not answered) In the New Keynesian model, suppose that in the short run the central bank cannot observe aggregate output or the shocks that hit the economy. However, the central bank would like to come as close as possible to economic efficiency. That is, ideally the central bank would like the output gap to be zero. Suppose initially that the economy is in equilibrium with a zero-output gap. (a) Suppose that there is a shift in money demand. That is, the quantity of money demanded increases for each interest rate and level of real income. How well does the central bank perform…Consider the classical AS-AD model with misperceptions. Assume that the economy is initially at its general equilibrium. Now, suppose the central bank considers an increase in the nominal money supply that is not anticipated by households or firms. a. How does the misperception theory work? b. Which of the three markets is first affected (labor, goods, or asset market)? Explain and show graphically how this market is affected by an unanticipated increase in the nominal money supply. c. Use the classical version of the AS-AD model with misperceptions to explain and to show graphically how an unanticipated increase in the nominal money supply affects the short-run equilibrium. d. Use the classical version of the AS-AD model with misperceptions to explain and to show graphically how an unanticipated increase in the nominal money supply affects the long-run (general) equilibrium.
- What would happen when there are money demand shock and money supply shock? Explain it by using IS-LM and AD-AS framework.Suppose the economy is initially in its long-run equilibrium. Due to the biased (overestimated) expectation of return, the entrepreneurs overwhelmingly become much more aggressive in investment holding other things equal. a. Use the IS-LM model and AD-AS model to graphically illustrate the impact of the biased expectation in the short run and in the long run. What are the changes in the equilibrium real interest rate, output, and prices? b. If the central bank wants to offset the impact of the biased expectation, what is the appropriate measure? Draw a graph as in part a. for illustration. What are the changes in the equilibrium real interest rate, output, and prices in this case?Suppose now that economists expect the velocity ofmoney to increase by 50% as a result of the monetarystimulus. What will be the total increase in nominalGDP?
- The main argument against monetary policy is that it affects only nominal variables, not real variables. Explain this argument using the method below. I. Explain and show on a graph the short-run and long-run equilibrium changes in the AD/AS model from expansionary monetary policy. How does this support an anti-monetary policy stance? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Explain the IS LM model for reduced policy rate in goods and services market and finincal marketPlease no written by hand and no emage Assume that the economy is experiencing a negative GDP gap. If the Federal Reserve engages in expansionary monetary policy, which of the following best describes the outcome? Group of answer choices The aggregate demand curve shifts to the right, the economy moves toward potential RGDP, and the rate of inflation falls. The aggregate demand curve shifts to the right, the economy moves toward potential RGDP, and the rate of inflation rises. The aggregate demand curve shifts to the right, the economy moves toward potential RGDP, and the rate of inflation remains relatively stable.
