What are supply shocks? Why are policy choices hard when there are negative supply shocks? Would you model the pandemic of 2020 as a supply shock or a demand shock? Why?

Q: Why do temporary negative supply shocks pose adilemma for policymakers?

A: Dilemma refers to the condition when an individual faces difficulty in making an efficient decision…

Q: Which perspective is better suited to handling the inflation we face today? Keynesian or…

A: Finding a balance between Keynesian and Neoclassical models is like to riding two horses at the same…

Q: Discuss the argument that activist policies are necessary following large negative economic shocks…

A: To stabilize the economy monetary and fiscal policies are used. The goal of both the policy is to…

Q: Suppose that consumers become pessimistic about the future health of the economy. What will happen…

A: The Agrregate Demand plays an important role in framing the  correct policy for the economy. To…

Q: an increase in the corporate tax rate is an example of ? demand shock, supply shock, or neither

A: A government-levied tax on a company's profits is known as the corporate tax rate. A rise in the…

Q: Could you please also sort the following shocks into positive or negative aggregate supply or…

A: aggregate supply shows the total units produced in the economy whereas aggregate demand shows the…

Q: Craig and Kris were walking directly toward each other in a congested store aisle. Craig moved to…

A: Under macroeconomics, the entire workings of the economy as well as the impact of various aggregates…

Q: When the economy is hit by a real shock, some economists think that the best response is for the Fed…

A: The SRAS, LRAS, and AD curves can be affected by a significant real shock in an economy. In reaction…

Q: Suppose the Central bank announces today a change in monetary policy: it is increasing target…

A: People will create their expectations about what will be happening in the future based on what has…

Q: Explain the steps that needs to be taken to avoid the unexpected shocks of the market.

A: The macro environment is an outfit that indirectly impacts the effectiveness and functioning of a…

Q: Give an example of a demand shock and a supply shock and show how it may push output and employment…

A: The aggregate demand curve shows that the demand increases or decreases due to a change in factors…

Q: Why, in general, do shocks force people to make changes? Give at least two examples from your own…

A: Shock: It refers to the change in the variable or relationship that shows the considerable effect on…

Q: How might the response of a central bank to an external inflation shock depend upon the way that the…

A: Inflation Shock:- An inflationary shock occurs if commodity prices rise unexpectedly (e.g., as a…

Q: What is the basic economic philosophy behind the conclusion that “a big shock to consumer spending…

A: Unemployment: - unemployment is that portion of the labor force that is able to do work and looking…

Q: Which of the following would be positive aggregate demand shock? A) a slower money growth B)…

A: The correct option is C.

Q: Which of the following events will not cause a supply shock that would shift the aggregate supply…

A: A supply shock is any event or calamity which leads to a reduction in the aggregate supply of the…

Q: Assume the economy has entered a recession. Identify two fiscal and two monetary policy actions that…

A: please find the answer below.

Q: Sort the following shocks into aggregate supply or aggregate demand shocks. Remember that "shocks”…

A: "Aggregate supply indicates total units of commodities that firms produce and sell at a given price…

Q: According to mainstream economists, what is the usual cause of macroeconomic instability? What role…

A: The Economic instability means shock to an economy.  Instability leads to more unemployment, low…

Q: What is positive supply shock? What are the few examples to positive supply shocks? What is the…

A: A supply shock refers to the changes in aggregate supply in the economy.

Q: Discuss what the long-run Phillips curve looks like in the neoclassical perspective, and why the…

A: Macroeconomics analyzes the economy as a whole. It studies aggregate economic concepts such as…

Q: What is the fundamental tradeoff faced by The Fed when responding to a negative real shock? (Three…

A: A negative real shock is the events of an unexpected shock that tends to affect the fundamental…

Q: Explain the role of expectations in the macroeconomy.

A: Expectations means forecasting future from the available information and past experiences.

Q: are the likely results of an adverse supply shock

A: Adverse supply shock is the shock which affects the supply adversely. It causes a sudden decrease in…

Q: If there is a decrease in inflation what happens to aggregate supply. Aggregate demand would shift…

A: An decrease in the average price level of an economy is termed as deflation or decrease in…

Q: Would you expect to see long-run data trace out a stable downward-sloping Phillips curve?

A: The Phillips curve(PC) shows the negative association between unemployment and inflation. This…

Q: How does the economy evolve over time after the initial impact of the shock?

A: Shocks can be defined as an unanticipated change in the economy that moves the aggregate demand (AD)…

Q: Are there any “good” supply shocks? Explain

A: A supply shock is an occurrence where the supply of a product or service, or goods and services in…

Q: “Policymakers would never respond by stabilizing output in response to a temporary positive supply…

A: The temporary supply shock leads to a shift in the aggregate supply curve down. This shift moves the…

Q: Why does the economy take several periods before returning to its steady state following a shock?

A: A steady-state economy tries to achieve stability among increases in supply and expansion in the…

Q: in the Lucas Imperfect Information model, do aggregate demand shocks have real affects? Explain.…

A: In the Lucas model, aggregate demand shocks only effect real output when they are unexpected. We…

Q: Concept of Hysteresis suggests that the economic shocks affect the economy only for a short time…

A: The economics is the study of human behavior in regard to the use of scarce resources that have…

Q: Suppose that the oil price sharply increased for a while, which increased production costs, causing…

A: In the goods market with AD-AS model, the increase in oil price implies an increase in the cost of…