In response to the effects of a negative supply shock, the Federal Reserve decide in aggregate demand to enact monetary policy that result in a decrease aggregate demand. What are the effects of this choice? An increase in aggregate output and a decrease in the aggregate price level. An increase in aggregate output and increase in the aggregate price level. A decrease in aggregate output and an increase in the aggregate price level. A decrease in aggregate output and a decrease in the aggregate price level.
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In response to the effects of a negative supply shock, the Federal Reserve decide in aggregate
An increase in
An increase in aggregate output and increase in the aggregate price level.
A decrease in aggregate output and an increase in the aggregate price level.
A decrease in aggregate output and a decrease in the aggregate price level.
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- Which of the following does not cause the aggregate demand curve to shift to the right? A) A tightening monetary policy. B) An investment boom C) An expansionary fiscal policy D) An expansionary monetary policySuppose velocity rises and the money supply falls. How will things change in the AD–AS framework if a change in the money supply is completely offset by a change in velocity? Check all that apply. The increase in velocity could shift the AD curve to the left by the same amount as the fall in the money supply shifts the AD curve to the right. Changes in the money supply would have no effect on Real GDP, the short-run price level, nor the long-run price level. A change in the money supply would decrease Real GDP, the short-run price level, and the long-run price level. The increase in velocity could shift the AD curve to the right by the same amount as the fall in the money supply shifts the AD curve to the left.In order to stimulate the sagging European economy, the European Central Bank (ECB) decides to engage in expansionary monetary policy. Your job as one of the advisors to the ECB is to explain to the public what this policy expects to accomplish. Using a short run aggregate supply and aggregate demand graph, illustrate what happens to the overall economy as a result of this monetary policy. Which curve shifts? What happens to the following (up, down, stay the same): Output: Employment: Price levels:
- Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world. Explain how this increase in interest rates will affect each of the following for the Country X. Investment The international value of its currency Exports Using a correctly labelled aggregate demand and aggregate supply diagram, show how the change in investment you identified in part (a) will affect each of the following in the short run. Output The price level Identify one fiscal policy action that could counter the effect identified in part (b). Explain how this policy will affect each of the following. Output The price level Nominal interest rates i. Identify one monetary policy action that could counter the effects identified in part (b).…Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world. Explain how this increase in interest rates will affect each of the following for the Country X. Investment The international value of its currency Exports Using a correctly labelled aggregate demand and aggregate supply diagram, show how the change in investment you identified in part (a) will affect each of the following in the short run. Output The price level Identify one fiscal policy action that could counter the effect identified in part (b). Explain how this policy will affect each of the following. Output The price level Nominal interest rates i. Identify one monetary policy action that could counter the effects identified in part (b).…Assume a country’s economy is currently in recession. Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following. Current real output, labeled Y1, and current price level, labeled PL1 Full employment output, labeled Yf Identify one action the central bank can take to help the economy recover from the recession. Draw a correctly labeled graph of the money market, and show the impact of the central bank’s action identified in part (b) on the nominal interest rate. On your graph for part (a), show the effect of the central bank’s action identified in part (b) on real output and the price level. Assume there is an increase in business confidence as a result of the central bank’s action. What will happen to the demand for capital goods? Draw a correctly labeled graph of the loanable funds market, and show the effect of the change identified in part (e)(i) on the real interest…
- Country X, an open economy, has an increase in the demand for money which led to a significant increase in the real interest rates relative to the rest of the world. Explain how this increase in interest rates will affect each of the following for the Country X. Investment The international value of its currency Exports Using a correctly labelled aggregate demand and aggregate supply diagram, show how the change in investment you identified in part (a) will affect each of the following in the short run. Output The price level Identify one fiscal policy action that could counter the effect identified in part (b). Explain how this policy will affect each of the following. Output The price level Nominal interest rates i. Identify one monetary policy action that could counter the effects identified in part (b).…Assume a country’s economy is currently in recession. Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following. Current real output, labeled Y1, and current price level, labeled PL1 Full employment output, labeled Yf Identify one action the central bank can take to help the economy recover from the recession. Draw a correctly labeled graph of the money market, and show the impact of the central bank’s action identified in part (b) on the nominal interest rate. On your graph for part (a), show the effect of the central bank’s action identified in part (b) on real output and the price level. Assume there is an increase in business confidence as a result of the central bank’s action. What will happen to the demand for capital goods? Draw a correctly labeled graph of the loanable funds market, and show the effect of the change identified in part (e)(i) on the real interest…The graph below shows the long-run aggregate supply (LRAS), the short-run aggregate supply (SRAS), and aggregate demand (AD) curves for a given economy. Manipulate the curves to show the long run effect of an increase in money supply. In the long run, an increase in the money supply will result in the following.
- One reason the aggregate demand curve is downward sloping is that a lower price levelConsider the figure to the right. What change in the position of the aggregate demand curve could generate deflation that is, a decrease in the equilibrium price level? What type of variation in the quantity of money placed into circulation by the Bank of Canada could generate such a change in the position of the aggregate demand (AD) curve? A fall in the equilibrium price level could be caused by Canada could generate such a change in the position of the aggregate demand (AD) curve by the quantity of money placed into circulation. in aggregate demand. The Bank of 1.) Using the line drawing tool, draw a new AD curve that shows the effects of decreasing the quantity of money in circulation. Label your line "AD2." 2.) Using the point drawing tool, indicate the economy's new long-run equilibrium price and level of real GDP. Label this point "E₂. Carefully follow the instructions above, and draw only the required objects. Price Level LRAS₁ E₁ Real GDP per Year ($ trillions) AD₁Which of the following is true: An decrease in the price level raises money demand and decreases the interest rate. A higher interest rate reduces investment and, thereby, the quantity of goods and services demanded. An increase in the money supply will ultimately lead to the aggregate demand curve shifting to the left. A decrease in the money supply will ultimately lead to the aggregate demand curve shifting to the right.