Which school of economic thoughts suggests that the speed of adjustment for self-correction to potential GDP would be very quick? O. monetarism O. Keynesian economics O. supply-side economics O. rational expectations theory
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Which school of economic thoughts suggests that the speed of adjustment for self-correction to potential
O. monetarism
O. Keynesian economics
O. supply-side economics
O. rational expectations theory
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- Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…Suppose the price of crude oil increases and we produce just enough crude oil for our own consumption. Increasing the interest rate will the existing recessionary gap. If the central bank does not change the interest rate, will adjust and bring the economy back to Yp. Worsen; wages O b. Improve; wages O c. Improve; tax rates O d. Worsen; tax rates1Why low rate inflation is considered necessary for economic grwoth? Oa It does not affect the purchasing power of wages Ob. It indicates that the currency is in continuous demand by the people Oc taffects only the rich and not the poor Od itact as an incentive to boost in supply in the economy 2When the economy is in Keynesian macroeconomic equilibrium, planned investment is greater than actual investment. O a False O b. True 3Government fixes the floor and ceiling price which will not allow the producers to increase the price on their wish, this is a type of. O a Physical control called price pegging O b. Monetary policy control measures O. Physical control called price tagging Od. Fiscal policy control measures O e None 4Rising output coupled with falling prices is called stagflation O a. False O b. True 5The Value of marginal propensity to consume lies O a. O to 1 O b. Less than zero Oc -1 to 1 Od. Between O to 1 6The Central Bank way to control inflation is Oa Monetary policy…
- What is the key difference between the IS-MP-PC model and the AD/AS model? O In AD/AS model, the government can not borrow In AD/AS model, the central bank can not change the interest rate O In AD/AS model, the central bank sticks to a rule O In AD/AS model, the government can not change its expenditure09. The left-hand Which of the following statements is tru about the diagrams above depicting the macroeconommy in both Keynesian and Classical frameworks and a change from AEo to AE* and ADo to AD*? a) The left-hand diagrams show the effect of an increase in Aggregare Expenditures (and Aggregate Demand), where the short-run Aggregate Supply is horizontal, meaning a constant products price level. b) The right hand diagrams show the effect of an increase in Aggregate Expenditrues (and Aggregate DEmand), where short-run Aggregate Supply is vertical (constant Aggregate Quantity Supplied). c) The left-hand diagrams illustrate the Keynesian range of the shor-run Aggregate Supply curve, where Keynesian expansionary policy does not cause any inflation and thus is very effective. d) The right-hand diagrams illustrate the Classical or Monetarist range of the short-run Aggregate Supply curve, where Keynesian expansionary policy is totally dissipated in…Chapter 11: Aggregate Demand I: Building the IS-LM Model Question: The Keynesian cross shows ..... of and ....... in the ... run. Lütfen birini seçin: a. equality / planned expenditure / income / short O b. determination / equilibrium income / the interest rate / long. determination / equilibrium income / the interest rate / long. O d. equality/planned expenditure/ income / long. Pe determination/ equilibrium income / the interest rate / short.
- According to the Keynesian model, which of the following would NOT increase aggregate demand? Government expands its social projects and increases taxes to balance the budget а. O b. A decrease in the number of employees in the government agencies c. Government drops the taxes for private businesses O d. Government establishes a new agency that helps the unemployed to find a job е. Government changes the laws whereby the tax of the interest earned becomes changes from a positive number to zero.Aggregate Price Level Assume that the United States government introduces an expansionary monetary policy, increasing the money supply in the market. Using the graph below, demonstrate the long run effect on aggregate demand and short run aggregate supply. Then, answer the question to the right. LRAS Real GDP SRAS AD In the classical model of the price level, what is the long run effect of an increase in the money supply on real GDP? it increases GDP it decreases GDP it has no effect on GDPIf the intersection of aggregate demand (ADo) and aggregate supply (SRASO) is occurring below the level of potential GDP as the LRAS curve indicates, this is described as LRAS SRAS, P, E, E AD, Pa AD Y. Real GDP O an inflationary gap O a deflationary gap. O the business cycle O an uptick in the economy Price Level
- According to Keynes, the government may fight unemployment by O raising its budget deficit O increasing the supply of money O through a rise in its spending and a cut in tax rates O all of the aboveThe short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?
