Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 12, Problem 8PA
(a)
To determine
The impact of shocks to the economy that arises from the exogenous changes in demand for the goods and services.
(b)
To determine
The impact of shocks to the economy arises from the exogenous changes in demand for money.
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Students have asked these similar questions
The Central Bank is considering two alternative monetary policies:
holding the money supply constant
adjusting the money supply to hold the interest rate constant.
In the IS-LM model, which policy is better to stabilize output if:
all shocks to the economy arise from external changes in the demand for goods and services?
all chocks to the economy arise from external changes in the demand for money?
. Assume that an economy is initially at the natural rate of unemployment.
There was an adverse supply shock, such as oil shock, earthquake, etc. The Fed increases the money supply. Graphically illustrate and explain short run monetary non-neutrality and long run monetary neutrality using IS-LM model, AD-AS model, and the Philips curve.
It is assumed that everything else stays constant.
WILL GIVE THUMBS UP!!!
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.
Can you please help with the explanation of the below?
In contemporary monetary theory, we do not normally think of using a money stock to implement monetary policy. By setting m-p, the log of the real money stock, equal to money demand y-b.i where y and i are ln(GDP) and the interest rate, create a money policy reaction function.
Noting that p+y is the log of nominal GDP how could you interpret m in this case so as to make your equation approximate the reality in Australia?
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Similar questions
- The effectiveness of monetary policy in increasing or decreasing the growth GDP is at the heart of the debate as to the role of the Fed in fighting off recessions or spikes in inflation as we are experiencing now. It is your job to explain what the role of the central bank can have in stabilizing the economy and whether its policies in booms and recessions are symmetrical. Using both the Ap function as well as the IS-LM model, explain and illustrate with graphs under what conditions a central bank can do much and under what conditions a bank can do little to nothing to make spending and growth of real GDP rise or fall. Then, use the IS-LM model to illustrate and explain the expected move by the Fed at its next meeting in December to raise short-term interest rates by 50 basis points. Will the effect on GDP be small, large, or zero? Given what you have written do you conclude that the Fed’s policy is symmetrical, i.e., it works with the same efficiency slowing a booming economy as it…arrow_forwardSuppose the Federal Reserve ("the Fed") shifts to a contractionary monetary policy by selling bonds through open-market operations. Assume that this policy is unanticipated. This problem will work through the short-run effects of this move. The following graph shows the money demand and money supply curves. Show the effect of the Fed's contractionary monetary policy by shifting one or both of the curves, and ignore any potential feedback effects. As a result of the Fed's policy, the interest rate______to______ .arrow_forwardThe 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.arrow_forward
- Using the IS-MP framework and assuming there is a temporary one-period consumption boom. Show and explain the initial and subsequent impact of the following policy decisions? i) The Federal Reserve keeps nominal interest rates unchanged. ii) The Federal Reserve adopts a stabilizing monetary policy. iii) In your opinion, explain using an economic argument, which of the above policies is superior.arrow_forwardRevisited Fiscal and Monetary Policy The IS Curve represents the equilibrium in the goods market and the LM Curve represents the equilibrium in the money market. The following are the equations for the IS-LM curve: IS relation : Y = C(Y – T) + I(Y, r + x) + G LM relation : r = ?̅ Y=Output, C=Consumption, T=Tax, I=Investment, G=Government Expenditure; r=interest rate, x=risk premium. a. What is unconventional monetary policy? When the central bank should conduct this kind of monetary policy? Give an example of unconventional monetary policy. b. Draw the IS-LM movement of unconventional monetary policy and tell the story behind it.arrow_forward
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