8. The micro-founded version of the sticky price model is summarized in the following equation P = EP + (1-s)a (y - Y). (a) What does the parameters mean? (b) Draw the SRAS curve when s = 0 and s = 1, respectively. Why does each case correspond to the long-run and short-run economy?
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- According to the "4-Quadrant Model" (4QM), which of the following statement is correct? O If there is a positive demand shock in the space market, the housing rent is going to increase in the short run, and will be lower than the current rent in the long run. If there is a positive demand shock in the space market, the housing price is going to decrease in the short run, and increase in the long run. If there is a positive demand shock in the asset market, the housing rent is going to decrease in the long run. O If there is a positive demand shock in the asset market, the housing price is going to decrease in the short run, and will be lower than the current price in the long run.Let us define "peak oil" as a point in time where the quantity of oil extracted and consumed (let's just assume these are the same) reaches a maximum and then starts to decline. Based on economic theory, (in other words, I'm not asking you to predict anything specific about the oil market in the real world, just a general theory question) should we expect this period of declining production to be accompanied by high and rising prices or by low/falling prices? Give a brief explanation using graphs where appropriate.IV. Shocks to the Equilibrium 1. Complete the sentences: The equilibrium changes only if These demand and supply curves shift if = 2. The estimated monthly U.S. demand function for avocados is Q 14440p + 20pt, where pt is the price of tomatoes, a substitute for avocados. The estimated supply function is Q 50 + 15p. The initial price of tomatoes is $0.80. Using algebra, determine the initial equilibrium price and quantity of avocados, and then determine how price and quantity change if the price of tomatoes increases by $0.55 to $1.35. =
- The shape of the short-run aggregate supply (SAS) curve reflects two different types of microecanomic markets (auction markets and the posted price markets). How is the price level Vinked to the level of dutput in each market? List five factors that might cause an upward shift of the SAS curve. Maximum number of characters including HTML tags added by text editor): 32,000 w ih Tet fdter fand cheracte OuenRefer to the graph shown. During the Reagan Administration (1981 to 1989), tax rates were reduced significantly, while federal defense spending rose by 80 percent. The effect of these policies on the AD curve is best shown as a movement from: Price level Multiple Choice O B O A to B A to C A to D. C AD1 ADO BOTOXI AD2 Real output SubmiThe outbreak of COVID-19 adversely attacks most economies. Some economists e/2 argue that the impacts on the macroeconomy mainly come from (i) the reduction in consumption and investment appetite, while others believe that the impacts mainly come from (ii) the immediate destruction of the supply-chain and production. Suppose two quarters since the outbreak of the COVID-19, changes in selected macroeconomic data of Country X can be summarized as below: Last year This year Annualized economic growth rate 4% -6% Unemployment rate 5% 8% Inflation rate 2% 5% Using an AD-AS model, explain whether argument (i) or (ii) above fits better to а. the case of Country X. b. Given your answer in (a), briefly discuss one plausible short-run dilemma facing the central bank of Country X.
- 1) "Your answer must be wrong," a fellow classmate says. "The question is asking about the long run, but you say both the price level and real output change. That can't be true -- only prices change in the long run!" Your fellow classmate is Group of answer choices incorrect; this is only true when the AS curve is shifting. correct; In the long run, only prices can change from any shift. correct; only a change in government policy can change both prices and output in the long run. incorrect; this is only true when the AD curve is shifting Solve in one hour for upvoteCarefully explain why the price level are rigid in the short run (SR). Illustrate your answer using a real world example where a price of an item may not change for months even though the raw material cost to produce that item may change.A) Distinguish between the short run and the long run as they relate to macroeconomics. Why is the distinction important? B) Use graphical analysis to show how each of the following would affect the economy first in the short run and then in the long run. Assume that the United States is initially operating at its full-employment level of output, that prices and wages are eventually flexible both upward and downward, and that there is no counteracting fiscal or monetary policy. i) Because of a war abroad, the oil supply to the United States is disrupted, sending oil prices rocketing upward. ii) Construction spending on new homes rises dramatically, greatly increasing total U.S. investment spending. iii) Economic recession occurs abroad, significantly reducing foreign purchases of U.S. exports.
- Why is price “stickiness” or “rigidity” important for understanding macroeconomic adjustments? How would policy recommendations be different if prices adjusted immediately?The purpose is to know if you can define each concept through a clear and precise explanation. Imagine that you are going to explain each term to someone who does not know anything about macroeconomics; With this in mind, the explanation should be as clear and simple as possible (not brief). Write a minimum of three sentences per term.1. investment demand2. surplus3. savings offerThe main differences between withdrawals and injection in macroeconomics are: ……………………