Rule based policy pro-cyclical or countercyclical

Assignment Help Business Economics
Reference no: EM131169611

Below draw an AD/AS graph and a money market graph side-by-side. For the money market, use an upward sloping money supply curve and assume that the equilibrium interest rate in the money market is 5%. Also, assume that actual GDP is at full employment and that the equilibrium price level in the AD/AS graph is 100. Now shift AD to the right based on an increase in animal spirits. Show how the money market graph will adjust to a new equilibrium. Then explain and show what happens if the Fed acts to keep the equilibrium quantity of money constant. Is this rule based policy pro-cyclical or countercyclical? (explain).

Reference no: EM131169611

Questions Cloud

Global and domestic macroeconomics : We know the following about a country called Fribonia: Co=10,000 C1=0.8 T=10,000 Tr=2,500 G=7,500 I=5,000 QUESTIONS: (a) Formulate the corresponding macroeconomic model identifying each of its equations.
Is there subgame perfect equilibrium : You are considering entering a market serviced by a monopolist. You currently earn $0 economic profits, while the monopolist earns $5. If you enter the market and the monopolist engages in a price war, you will lose $5 and the monopolist will earn $1..
Find nash equilibrium for one-shot version of this game : You operate in a duopoly in which you and a rival must simultaneously decide what price to advertise in the weekly newspaper. If you each charge a low price, you each earn zero profits. If you each charge a high price, you each earn profits of $3. Fi..
Does your rival have dominant strategy : In a one-shot game, if you advertise and your rival advertises, you will each earn $5 million in profits. If neither of you advertises, your rival will make $4 million and you will make $2 million. Write the above game in normal form. Do you have a d..
Rule based policy pro-cyclical or countercyclical : Below draw an AD/AS graph and a money market graph side-by-side. For the money market, use an upward sloping money supply curve and assume that the equilibrium interest rate in the money market is 5%. Then explain and show what happens if the Fed act..
European countries experience an economic expansion : All European countries experience an economic expansion, raising incomes in each of the European countries. The government decides to decrease the amount it spends on the military.
Is the economy facing an inflationary-recessionary gap : Is the economy facing an inflationary or a recessionary gap? What fiscal policy can the government implement that might bring the economy back to long run macroeconomic equilibrium? Illustrate with a diagram and explain how the interest rate, real GD..
To measure the price elasticity of demand : To measure the price elasticity of demand, economists calculate: How much price changes relative the change in the quantity demanded. The absolute value of the percentage change in quantity demanded relative to the absolute value of the percentage ch..
Healthcare system as third-party payer system : In the text we discuss the U.S. healthcare system as a "third-party payer" system: When you receive healthcare in the U.S. generally you are not paying for it; you are paying for insurance, and your insurance pays for the healthcare.

Reviews

Write a Review

 

Business Economics Questions & Answers

  Power sources in this negotiation

Discuss your power sources (and your co-owner of the property you two are trying to sell power sources) in this negotiation, and analyze how you can strengthen your power position

  Calculate the total benefit to society of the optimal

A society has two people: 1 and 2. Person 1's true demand (marginal benefit) for a public good is given by P= 60 - 2G and 2's true demand is given by P = 120 -G. the total cost of providing G is TC = G^2. Calculate the total (net) benefit to society ..

  Find the constraint curve

There are only two consumers: Bill and Ted, and two goods: apples and bananas. Bill and Ted like apples and oranges. Bill is always willing to subsitute 1 apple for 3 bananas. Construct an appopriately sized Edgeworth box for them. Find the constrain..

  Despite the absence of patent protection

Semi-Salt Industries began its operation in 1975 and remains the only firm in the world that produces and sells commercial-grade polyglutamate. Despite the absence of patent protection, Semi-Salt has averaged accounting profits of 5.5 percent on inve..

  Short-run impact on the firms production

Illustrate what do you think would be the short-run impact on the firm's production.

  What is the initial level of output per person

Suppose the parameters of the Romer model (the no-capital version) take the following values: A¯ 0 = 100, ¯` = 0.10. ¯z = 1/500, and L¯ = 100. What is the growth rate of output per person in this economy? What is the initial level of output per perso..

  Economic indicators-events that resulted in this loss

Choosing a long position on the USD/CHF (Us dollar/Swiss Franc) resulted in a loss over the past month. What in the past 2 months (September/October) could have been economic indicators/events that resulted in this loss? What would be any factors tha..

  The national debt doubled in nominal terms

The national debt doubled in nominal terms during a time when the GDP Deflator increased from 200 to 300. This implies that the national debt: is smaller in real terms, has more than doubled in real terms, has increased in real terms, but it has less..

  What are the pros and cons of trade restrictions

What are the pros and cons of trade restrictions? What are the pros and cons of free trade? Which is better in your opinion?

  The effectiveness of pay for performance plans note

The Effectiveness of Pay for Performance Plans Note: paper must be a minimum of 3 full double-spaced pages and a maximum of 5 pages. You may use your textbook as a source, but you must have a minimum of 3 non-text sources as well. Please document you..

  Effects of the increased government spending are immediate

Suppose the GDP is $40 billion below its potential level. It is expected that next-period GDP will be $20 billion below potential and that two periods from now it will be back at its potential level. You are told that the multiplier for government sp..

  What is the equilibrium output and price level

What is the equilibrium output and price level? If aggregate demand shifts right, what is equilibrium output? If aggregate demand shifts left, what is equilibrium output?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd