Suppose that the production function for the economy is given by: Y = AL/4K /4 Suppose...
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Suppose that the production function for the economy is given by: Y = AL¹/4K ³/4 Suppose that this economy has 256 units of Labour, and 81 units of capital, and TFP (A) is equal to 100. The Short-Run Aggregate Supply Curve (AS) is given by: Y = 20p And the Short-Run Aggregate Demand Curve (AD) is given by: Y = 25,000 - 20p 1. What is potential GDP in this question (Y*)? Show your work. 2. What is the current Short-Run Equilibrium value for Real GDP (Y) and the price level (p)? Show your work. Are we currently in an Inflationary Gap, Recessionary Gap, or in Long- Run Equilibrium? How do you know? Suppose that the Central Bank and the Government does not want to intervene, and so there are no fiscal policy or monetary policy actions taken to close this output gap. The output gap closes naturally with no intervention. 3. What would be the new price level in long-run equilibrium after the economy has closed this output gap? What would be the percent change in the price level as we move from the current (short-run) price level to this new price (long-run) level? Suppose instead that the Central Bank takes action and uses monetary policy to completely close this output gap in the short-run. 4. What would be the new price level in long-run equilibrium after the Central Bank has closed this output gap? What would be the percent change in the price level as we move from the current (short-run) price level to this new price (long-run) level? Suppose that the production function for the economy is given by: Y = AL¹/4K ³/4 Suppose that this economy has 256 units of Labour, and 81 units of capital, and TFP (A) is equal to 100. The Short-Run Aggregate Supply Curve (AS) is given by: Y = 20p And the Short-Run Aggregate Demand Curve (AD) is given by: Y = 25,000 - 20p 1. What is potential GDP in this question (Y*)? Show your work. 2. What is the current Short-Run Equilibrium value for Real GDP (Y) and the price level (p)? Show your work. Are we currently in an Inflationary Gap, Recessionary Gap, or in Long- Run Equilibrium? How do you know? Suppose that the Central Bank and the Government does not want to intervene, and so there are no fiscal policy or monetary policy actions taken to close this output gap. The output gap closes naturally with no intervention. 3. What would be the new price level in long-run equilibrium after the economy has closed this output gap? What would be the percent change in the price level as we move from the current (short-run) price level to this new price (long-run) level? Suppose instead that the Central Bank takes action and uses monetary policy to completely close this output gap in the short-run. 4. What would be the new price level in long-run equilibrium after the Central Bank has closed this output gap? What would be the percent change in the price level as we move from the current (short-run) price level to this new price (long-run) level?
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let me answer all the questions fully 1 What is potential GDP in this question Y Show your work Y ALKL34 100 256 8125634 100 256 0534 25600 2 What is ... View the full answer
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