Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram...
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Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Assume that a country's economy is in a short-run equilibrium and the actual unemployment rate is lower than the natural rate of unemployment. (a) Using a correctly labeled graph of the long-run aggregate supply curve, short-run aggregate supply curve, and aggregate demand curve, show each of the following. (i) Current price level, labeled PL₁, and current output level, labeled Y₁ (ii) The full-employment output level, labeled YF (b) Assume the country's banking system has ample reserves. What monetary policy action should the country's central bank use to move the economy toward its long-run equilibrium? (c) Draw a correctly labeled graph of the country's reserve market, and show how the central bank's action to move the economy toward its long-run equilibrium affects the policy rate in the short run. (d) Based on the interest rate change from part (c), will each of the following increase, decrease, or remain the same in the short run? (i) Real output. Explain. (ii) Natural rate of unemployment (e) Assume instead that the central bank does not pursue the monetary policy action from part (b) and there was no other government intervention. Will each of the following increase, decrease, or remain the same in the long run? (i) Short-run aggregate supply. Explain. (ii) Employment Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Assume that a country's economy is in a short-run equilibrium and the actual unemployment rate is lower than the natural rate of unemployment. (a) Using a correctly labeled graph of the long-run aggregate supply curve, short-run aggregate supply curve, and aggregate demand curve, show each of the following. (i) Current price level, labeled PL₁, and current output level, labeled Y₁ (ii) The full-employment output level, labeled YF (b) Assume the country's banking system has ample reserves. What monetary policy action should the country's central bank use to move the economy toward its long-run equilibrium? (c) Draw a correctly labeled graph of the country's reserve market, and show how the central bank's action to move the economy toward its long-run equilibrium affects the policy rate in the short run. (d) Based on the interest rate change from part (c), will each of the following increase, decrease, or remain the same in the short run? (i) Real output. Explain. (ii) Natural rate of unemployment (e) Assume instead that the central bank does not pursue the monetary policy action from part (b) and there was no other government intervention. Will each of the following increase, decrease, or remain the same in the long run? (i) Short-run aggregate supply. Explain. (ii) Employment
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a Draw a correctly labeled graph of the longrun aggregate supply curve shortrun aggregate supply curve and aggregate demand curve Current price level labeled PL and current output level labeled Y The ... View the full answer
Related Book For
Accounting Information Systems
ISBN: 978-0133428537
13th edition
Authors: Marshall B. Romney, Paul J. Steinbart
Posted Date:
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