Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 19, Problem 7RQ
Subpart (a):
To determine
Price and output.
Subpart (b):
To determine
Downward wage inflexibility.
Subpart (c):
To determine
GDP and money supply.
Subpart (d):
To determine
Relevance of monitory and fiscal policy.
Subpart (e):
To determine
Relevance of Fed.
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d. A decrease in aggregate demand.
e. An increase in aggregate demand that
exceeds an increase in aggrega
supply.
Suppose that the Phillip's curve and Okun's law are given, respectively, by
n=n² - (U-U")
and
U-U^----(Y-P²)
where is expected inflation, U" is the natural rate of unemployment, and Y is potential output. Supposing that = 22, U" =4, and Y² = 24, solve for the aggregate supply curve.
O
O
O
17--2
10+
1
x=10+ - Y
=10--Y
- 12/1
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- 4. LO 4 In Figure 3.11, after the 1981-1982 reces- sion, does the price level appear to be procyclical, countercylical, or acyclical? Why is this important?arrow_forwardDiscuss the following statements: a. The Keynesian multiplier is higher the higher is the degree of openness of the economy'. b. 'There is no easy policy answer when it comes to dealing with a negative supply shock'. Consider the following economy. The production function is F(K,L) = K0.3 Lº.7. The saving rate and the depreciation rate are respectively: s = 0.10 and 8 = 0.07. Population growth is 1%, i.e. n = 0.01. c. Derive the capital accumulation equation for this economy. d. Find the steady state value of the capital stock per capita. e. Suppose that the initial capital stock per capita is: k = 1.5. Discuss the process of convergence of the economy to the steady state using the appropriate diagram. f. Calculate the optimal saving rate of the economy and discuss whether the economy at the steady state over or under-accumulates capital.arrow_forward8. Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? L012.6 a. An increase in aggregate demand. b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in aggregate demand. e. An increase in aggregate demand that exceeds an increase in aggrega supply.arrow_forward
- 14arrow_forwardRefer to the figure A above. Figure A Figure B Price Price P3 P2 `D, P, D2 Q, Quantity Q, Q2 Q, Quantity Assuming this market is representative of the economy as a whole, a negative demand shock will: 1) increase both the price level and the quantity of output produced. 2) increase output, but leave prices unchanged. O 3) lower the price level, but leave output unchanged. 4) raise the price level, but leave output unchanged.arrow_forwardI need a brief explanation of this Question no.5arrow_forward
- In which of the following situations would you prefer to be the lender? 1) Expected inflation rate is 7 percent and the interest rate is 9 percent 2) The interest rate is 25 percent and the expected inflation rate is 50 percent. 3) The interest rate is 13 percent and the expected inflation rate is 15 percent. O 4) The interest rate is 4 percent and the expected inflation rate is 3 percent. O 5) Expected inflation rate is 1 percent and the interest rate is 4 percent O6) None of the answers are correctarrow_forwardo 19. Which of these statements is true according to the Keynesian (post-Keynesian) view? a. Increases in monetary base cause an increase of money supply 20 b. Increase of money supply cause inflation c. Demands of firms for credit creates money supply d. Central banks can directly control money supply can couNOMIC OF prough anti- lated according to Keynes?arrow_forwardSolve it correctlyarrow_forward
- The equation of exchange is given by MXV = PxQ, where M is the money supply, V is the velocity of money, P is the economy's price level, and Q is Real GDP. Suppose the following diagram shows the current aggregate demand (AD) and aggregate supply (AS) curves in a hypothetical economy. PRICE LEVEL 2 12 REAL GDP (Trillions of dollars) AD O AS 2 ?arrow_forwardI help on question 7 understand reviewarrow_forward44arrow_forward
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