Change the equation of the aggregate price equation

Assignment Help Macroeconomics
Reference no: EM132506578

In the Sticky Price Model, suppose that the sticky price firms have the following price equation: Y: p=EP+a[EY- Y ¯ ]; where EY≠ Y ¯ Note: To get full credit show all work and graphs

a) Would this change the equation of the aggregate price equation? Show mathematically.

b) Explain how would higher expected output impact the aggregate price?

c) What is the new aggregate supply equation?

d) Suppose the economy is in a recession. Draw the aggregate demand curve and the new aggregate supply curve in a graph. Show:

i. How does the economy move back to the long run equilibrium in the absence of policy intervention? Provide intuitive explanation as well.

ii. If you were to make a policy recommendation that would assist the economy in going back to the LR equilibrium, what would be your recommendation? Show the effect in a graph.

Reference no: EM132506578

Questions Cloud

How strategies you suggested engaging to diverse learners : Explain how the strategies you've suggested are engaging to diverse learners. Cite scholarly sources to support how your strategies are examples.
What happens to real interest rates : Draw a correctly labeled loanable funds graph that shows what happens to real interest rates for each of the following situations: (You will have 3 graphs)
What is the amount of gain belmont should recognize : 7000 cash in the exchange. The exchange lacks commercial substance. What is the amount of gain belmont should recognize on this exchange?
What is the cost of deuces ending inventory on july : What is the cost of Deuces ending inventory on July 31 using the LIFO periodic method? On july 1, Deuce company had an inventory of 300 gas grills cost
Change the equation of the aggregate price equation : In the Sticky Price Model, suppose that the sticky price firms have the following price equation: Y: p=EP+a[EY- Y ¯ ]; where EY? Y ¯ Note: To get full credit
How modification is relevant to theory of differentiation : Examine "All Children Can Learn". Then, search the web for effective, evidence-based differentiated strategies that are engaging, motivating, and address the.
Describe the standards for english language arts : Describe (in general) the standards for English language arts. Summarize the Common Core State Standards initiative including their purpose.
What is the maximum price that could pay for a home : Based on your understanding of the loan-to-value ratio, what is the maximum price that you could pay for a home with these restrictions in mind?
What is the marginal propensity to consume : Answer the following questions about marginal propensity to consume and the multiplier. First provide the correct equation and then show your work to arrive at

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

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