Short-answer question 1. Why in our New-Keynesian model, equilibrium output (Y) and employment (N) are demand-determined....
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Short-answer question 1. Why in our New-Keynesian model, equilibrium output (Y) and employment (N) are demand-determined. What is the key parameter driving this result? Explain. 2. Ramey and Zubairy (2018) "Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data" (discussed in lecture 9) show that the government spending multiplier can be substantially larger than 1 (1.5) when the economy is at the ZLB. Explain how our New-Keynesian model can or cannot make sense of this result. 3. You are an economist work for the Central Bank. Propose a monetary policy action to decrease price level without sacrificing a drop in output. Use IS-LM AS-AD diagram to support your answer. 4. Suppose that, with the goal of stimulating aggregate demand in the next period (t + 1), the Government announces an increase in G++1(= T₁+1). Explain how agents' optimal decisions change with this policy and explain the effects on macroeconomic outcomes (P,Y,r). 5. Explain the concept of "Divine Coincidence" and clearly state the cases where it holds and where it does not hold in the New-Keynesian model. What are the reasons of the high inflation in Australia in late 2022 and early 6. 2023? Short-answer question 1. Why in our New-Keynesian model, equilibrium output (Y) and employment (N) are demand-determined. What is the key parameter driving this result? Explain. 2. Ramey and Zubairy (2018) "Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data" (discussed in lecture 9) show that the government spending multiplier can be substantially larger than 1 (1.5) when the economy is at the ZLB. Explain how our New-Keynesian model can or cannot make sense of this result. 3. You are an economist work for the Central Bank. Propose a monetary policy action to decrease price level without sacrificing a drop in output. Use IS-LM AS-AD diagram to support your answer. 4. Suppose that, with the goal of stimulating aggregate demand in the next period (t + 1), the Government announces an increase in G++1(= T₁+1). Explain how agents' optimal decisions change with this policy and explain the effects on macroeconomic outcomes (P,Y,r). 5. Explain the concept of "Divine Coincidence" and clearly state the cases where it holds and where it does not hold in the New-Keynesian model. What are the reasons of the high inflation in Australia in late 2022 and early 6. 2023?
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Demanddetermined Y and N in NewKeynesian Model Key parameter Price stickiness nominal wages and prices adjust slowly Explanation Firms hesitate to adj... View the full answer
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