When workers do not notice inflation has taken place they do not realize that their real wage has declined. This phenomenon is consistent with which reason for the upward slope in the SRAS curve? mispreceptions the interest rate effect menu costs the principle-agent problem
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When workers do not notice inflation has taken place they do not realize that their real wage has declined. This phenomenon is consistent with which reason for the upward slope in the SRAS curve?
mispreceptions |
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the interest rate effect |
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menu costs |
||
the principle-agent problem |
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- What is the reason behind why the SRAS curve is upward sloping? There are few unutilised resources Higher price level means higher nominal wages Higher price level means higher real wages Lower price level will increase profit Nominal wages and input costs are sticky in the short runFor each of the following events, explain the shortrun and long-run effects on output and the price level, assuming policymakers take no action ( Remember SRAS can also shift!!) The stock market declines sharply, reducing consumers’ wealth. (7.5) A technological improvement raises productivity. (7.5)Which of the following best describes the effect of the zero interest rate policy implemented in December 2008? A) It forced nominal interest rates to below zero. B) Its effectiveness was limited by the zero lower bound problem. C) It had the desired effect, promoting full recovery by 2010. D) It created a surge in inflation.
- . Suppose that there is an increase in the price of housing, which the central bank judges is atemporary asset price bubble. In the New Keynesian model, determine the central bank’s optimalresponse to this asset price increase, using diagrams. Discuss your results.Income tax collections: Group of answer choices rise during a recession, thus reduce the severity of the recession. rise during a recession, thus increase the severity of the recession. fall during inflationary episodes, thus increase the severity of the inflation. fall during a recession, thus reducing the severity of the recession.True/False with explanation In the dynamic AS-AD model, a perfectly inelastic aggregate supply curve means the central bank cannot control the rate of output growth or the inflation rate. There are an infinite number of combinations of real interest rates and inflation rates consistent with a nominal interest rate of zero.
- True or False... 1. In the dynamic AS-AD model, a perfectly inelastic aggregate supply curve means the centralbank cannot control the rate of output growth or the inflation rate.2. There are an infinite number of combinations of real interest rates and inflation rates consistentwith a nominal interest rate of zero.The economy of Pakistan has faced both a supply demand shock in the first quarter of 2020. Using the AS/AD model explain how you expect the economy to behave in the short and long run. How does the decision to reduce the policy rate impact the economy. Explain using the ISLM model focusing on impacts on the goods and services market and the financial market.In the Keynesian theory, money wages do not fall in response to a decrease in aggregate deman True False
- Refer to the Reserve Bank news release below. Use the AD/AS model to answer how each of the economic factors stated are affecting inflation and economic growth. Official Cash Rate unchanged at 1.5 percent Date 26 June 2019 The Official Cash Rate (OCR) remains at 1.5 percent. Given the weaker global economic outlook and the risk of ongoing subdued domestic growth, a lower OCR may be needed over time to continue to meet our objectives. Domestic growth has slowed over the past year. While construction activity strengthened in the March 2019 quarter, growth in the services sector continued to slow. Softer house prices and subdued business sentiment continue to dampen domestic spending. The global economic outlook has weakened, and downside risks related to trade activity have intensified. A number of central banks are easing their monetary policy settings to support demand. The weaker global economy is affecting New Zealand through a range of trade, financial, and confidence channels. We…Refer to the Reserve Bank news release below. Use the AD/AS model to answer how each of the economic factors stated are affecting inflation and economic growth. Official Cash Rate unchanged at 1.5 percent Date 26 June 2019 The Official Cash Rate (OCR) remains at 1.5 percent. Given the weaker global economic outlook and the risk of ongoing subdued domestic growth, a lower OCR may be needed over time to continue to meet our objectives. Domestic growth has slowed over the past year. While construction activity strengthened in the March 2019 quarter, growth in the services sector continued to slow. Softer house prices and subdued business sentiment continue to dampen domestic spending. The global economic outlook has weakened, and downside risks related to trade activity have intensified. A number of central banks are easing their monetary policy settings to support demand. The weaker global economy is affecting New Zealand through a range of trade, financial, and confidence channels. We…An increase in the expected rate of inflation will the expected return on bonds relative to the that on real assets, and shift the curve to the .