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As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices.
a. Starting from a long-run equilibrium, illustrate the effects of these two changes using both an aggregate-supply/aggregate-demand diagram and a Phillips-curve diagram. On both diagrams, label the initial long-run equilibrium as point A and the resulting the short-run equilibrium as point B. For each of the following variables, state whether it rises or falls, or whether the impact is ambiguous: output, unemployment, the price level, the inflation rate.
b. Suppose the Fed responds quickly to these shocks and adjusts monetary policy to keep unemployment and output at their natural rate. What action would it take? On the same set of graphs from part (a), show the results. Label the new equilibrium as point C.
c. Why might the Fed choose not to purse the course of action described in part (b)?
Differentiate the real exchange rate and the nominal exchange rate and describe two reasons why purchasing power parity does not hold for all goods and services.
natural monopolies is a commonly used, potential solution to the problems presented by natural monopolies. a. Giving incentives to firms to become b. Regulating c. Breaking up firms that are d. Outlawing price discrimination by e. Refusing to grant p..
Two banks have lent $20million each to a country in an Emerging Market. Bank A has total assets of $220 million and a capital to total assets ratio of 7 percent. Bank B has total assets of $350 million and a capital to total assets ratio of 6 perc..
Write a brief report describing what shift factors of supply and/or demand might be at work and how you would label those factors. Conclude the report with your forecast of what would likely result one month after the publication of the article.
Based on the reading assigned for this module, and your own Internet research, what adjustments are required for China to rebalance its current account. What risks are inherent in such adjustments
Jeffrey has his own delivery business, but Discrimina has only paid him cash. Each time, Jeffrey has given the company a receipt for the cash. While he waits, he sometimes goes out for donuts for the crew.
Suppose a firm in the short run under perfect competition with P=250, TC=1,000 + 100Q + 2.5Q^2 , and MC=10+5Q-Find out the level of output that the firm needs to produce to maximize profits?
As part of your answer explain what happens when aggregate expenditure either exceeds or falls short of output in the current period and what impact this has on production in the next period.
Can you articulate how macroeconomics and microeconomics come into play in the context of firm decision-making in a global business. Please provide an example.
Analyze the dynamics of supply and demand to anticipate market equilibrium and analyze the elasticity of demand and supply and its importance, and the effect of taxes or other public policies.
A producer of synthetic motor oil for automobiles and light trucks has made the following statement: "One quart of Dynolube added to your next oil change will increase fuel mileage by one percent.
Discuss in general the appropriate metrics that one may require to track. Also explain how investing in IT with an eyes towards the replacement or automation of another project or issue or task may work.
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