Use the AD-AS model to illustrate what the impact of an expansionary monetary policyinstrument will be on the general price level and the level of realproduction and income in the economy.
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Use the AD-AS model to illustrate what the impact of an expansionary monetary policyinstrument will be on the general price level and the level of realproduction and income in the economy.
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- How does restrictive monetary policy affect the level of investment and consumption? Explain your answer by using the IS/LM modelThe main argument against monetary policy is that it affects only nominal variables, not real variables. Explain this argument using the method below. I. Explain and show on a graph the short-run and long-run equilibrium changes in the AD/AS model from expansionary monetary policy. How does this support an anti-monetary policy stance? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Using the dynamic AD-AS analysis, show the effect of contractionary monetary policy.
- Using the AD-AS model, draw a graph and explain the effect of the implementation of a restrictive monetary policy on the equilibrium price level and the equilibrium level of output.The latest residential property price data from the Australian Bureau of Statistics show that housing prices across the nation rose by more than 20 percent last year. Housing is the most important source of household wealth. Using the AD-AS model, predict how this development affects output and the price level in the short run and the long run, assuming that policymakers take no action. How would your answers differ if the central bank responded with a contractionary monetary policy?Please draw the short run and long run AD-AS graph.c) According to the AD-AS model, what is more challenging for a central bank: to use active exogenous monetary policy to offset a financial shock, or to use active exogenous monetary policy to offset an exogenous increase in prices due to an oil price shock? Use the model to discuss each case separately. Can the central bank avoid a drop in output and a variation in the price level? c) According to the AD-AS model, what is more challenging for a central bank: to use active exogenous monetary policy to offset a financial shock, or to use active exogenous monetary policy to offset an exogenous increase in prices due to an oil price shock? Use the model to discuss each case separately. Can the central bank avoid a drop in output and a variation in the price level?
- Assume that oil prices increase drastically, shifting SRAS to the left. To offset the effects of this shock on the economy assume that monetary policy decreases AD. By following this policy, what variable is monetary policy trying to control? net exports government expenditures real GDP pricesBased on understanding of the AS-AD model, graphically illustrate and discuss what effects an increase in the money supply will have on the economy: Analyse the effects of the central bank policy on GDP and price level in the short run. Justify your answer. Analyse the effects of the central bank policy on GDP and price level in the long run. Justify your answer. In your graph, clearly illustrate the short-run and long-run equilibria. Discuss the effectiveness of the central bank policy in the short and in the long run? Justify your answer.Suppose the target rate of unemployment is 5 percent but the actual rate of unemployment is 2 percent. Given this information, which of the following policies is the least appropriate according to the AS/AD model? A, contractionary monetary policy B. an increase in the value of the dollar to decrease exports C. an increase in interest rates from the central bank D. None of the available answers. E. expansionary monetary policy
- In the AS/AD model, higher interest rates are produced by: Multiple Choice O O O O a steady-as-you-go monetary policy. a contractionary monetary policy. an expansionary monetary policy. an activist monetary policy.Suppose that the government wants to raise investment but keep output constant. According to the IS-LM model, what mix of monetary and fiscal policy will achieve this goal? Explain your policy recommendations. Illustrate your policy bundle in the IS-LM model.Monetary Policy: End of Chapter Problems 9. An economy is in long-run macroeconomic equilibrium with an unemployment rate of 5% when the government passes a law requiring the central bank to use monetary policy to lower the unemployment rate to 3% and keep it there. The central bank can achieve this goal in the short run by pursuing an expansionary - monetary policy. In the accompanying diagrams, shift the AD, LRAS, and/or SRAS curves and move the equilibrium point to its new position to illustrate the short-run and long-run changes when the central bank pursues this policy. Aggregate price level 10 9 10 T 10 Ka 23 Economy in the Short Run LRAS Real GDP www E SR AD about us N 47 SRAS 05 Aggregate price level P3 contact W Economy in the Long Run Real GDP EPIC LRAS SRAS AD
