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In late 2000, there were signs the U.S. economy might be heading into a recession. Some argued that the rise in energy prices during 2000 was the cause of the economic slowdown. Others pointed to the decline in the stock market and argued that this decline in wealth would reduce consumption spending. Assume the economy is initially at full employment.
(a) Using the ADI-IA (inflation adjustment) framework, explain how a rise in energy prices would affect output and inflation in the short run.
(b) Using the ADI-IA framework, explain how a fall in stock prices would affect output and inflation in the short run.
(c) Suppose you are chair of the Federal Reserve Board. If your only concern is keeping inflation stable, would you raise interest rates or would you lower them if you believe energy prices are the cause of the slowdown? Would you raise interest rates or would you lower them if you believe the stock market decline is the cause of the slowdown?
(d) Suppose you are chair of the Federal Reserve Board. If your only concern is keeping unemployment stable, would you raise interest rates or would you lower them if you believe energy prices are the cause of the slowdown? Would you raise interest rates or would you lower them if you believe the stock market decline is the cause of the slowdown?
What event can be used to explain the increase in the employment of information technology workers during the 1990s? What about the decrease in employment during the 2000s?
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Suppose the total benefit derived from a given decision, Q, is B(Q)=25Q-Q^2 and the corresponding total cost is C(Q) = 5 + Q^2, so that MB(Q) = 25 -2Q and MC(Q) = 2Q A.)what is total benefit when Q=2 when Q=10
Both SmithCo and Jones Inc. sell widgets. SmithCo's sales last month equaled 1000 units and it charged a price of $2. This month Jones Inc. reduced the price it sells its brand of widgets from $2.10 to $2, and SmithCo saw a reduction in the quanti..
If Adi believes that Jill will abide by their collusive agreement and perform only three surgeries, find a number of surgeries that Adi could perform that would maximize his profits.
What is an example of an inflation shock? How does a positive inflation shock affect the inflation adjustment curve?
You are considering buying a new car with a part of your student loan dollars as you really do not need the extra cash now. You have two alternatives with the following cost structures. Speedy Initial cost = $20,000Annual operating cost = $8,000 Us..
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