Consider a modified aggregate supply function which takes account for the emergence ofrandom business cycle shocks (ce) with Ele] - O in the sense thatYe - R - R ++ 6The loss function is the same as in exercise 1:L-(n - k)* +(m)?Notation: €: random shock; E[e,]: expected value of e; b: constant parameter, allother variables see Exercise 1.Having considered the scenario above complete the following tasks:a) Derive the central bank's preferred inflation rate and explain.

Output Equation in the economy - yt = πt - πte + y⏜ Where πt = Actual inflation rate , πte =…

Consider a modified aggregate supply function which takes account for the emergence of random business cycle shocks (c) with Ele] -o in the sense that The loss function is the same as in exercise 1: L--k) + Notation: e: random shock Ele,]; expected value of e b: constant parameter, all other variables see Exercise 1. ving considered the scenario above complete the following tasks: a) Derive the central bank's preferred inflation rate and explain.

Consider a modified aggregate supply function which takes account for the emergence of random business cycle shocks (c) with Ele] -o in the sense that The loss function is the same as in exercise 1: L--k) + Notation: e: random shock Ele,]; expected value of e b: constant parameter, all other variables see Exercise 1. ving considered the scenario above complete the following tasks: a) Derive the central bank's preferred inflation rate and explain.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 5E

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Exercise 1 Consider the following scenario. Aggregate output y at date t is specified as follows, Yt = Tt – T +ỹ where the trend level of output is represented by y. The central bank's loss function is captured by L 2 (y: – k)² +(T) 2 Where b> 0, and where k > 0 is a given parameter reflecting the normal level of aggregate production or the target level of output. The central bank takes the public's expectations as given. The society loss function is the same as the central bank loss function. Notation: y;: output/production; T: inflation rate; n: expected inflation rate; L: loss function; b, k: constant parameters; t: time index.
Please no written by hand solution Consider a scenario of a closed economy in the short run where price level is fixed. Assume that bothtaxes and money supply increase in a way that keep output constant in equilibrium (suppose that themarginal propensity to consume is less than one). Which of the following may result from the policychange?a) It will lead to an increase in investment but a decrease in consumption.b) It will result in an increase in investment but a decrease in government spending.c) It will lead to an increase in investment and private saving.d) It will decrease investment but increase in public saving.
Consider a modified aggregate supply function which takes account for the emergence of random business cycle shocks (ce) with Ele] - O in the sense that The loss function is the same as in exercise 1: L- (n - k)* +(m) Notation: €: random shock; E[e,]: expected value of e; b: constant parameter, all other variables see Exercise 1. Having considered the scenario above complete the following tasks: a) Derive the central bank's preferred inflation rate and explain. b) The result in a) reads as T = b(k – j) – %3D Explain the economic intuition of this result. c) Consider a more conservative central banker whose loss function is represented by L = }(y – k)? + }(7.) k) + (m) Apparently, the preferred inflation rate would read eb 1+b TE = 6(k – y) – What can you say about the relationship between B and b? le i larger or smaller than b? Provide an explanation.
How does a credible nominal anchor help improve theeconomic outcomes that result from a positive aggregatedemand shock? How does a credible nominal anchorhelp if a negative aggregate supply shock occurs? Usegraphs of aggregate supply and demand to demonstrate.
Illustrate and interpretthe short-run and longrun effects of temporary and permanentsupply shocks
Relating DSGE and AS/AD for a shock to government purchases: Consider thecomplete dynamic response of the economy to a temporary rise in governmentpurchases in the AS/AD framework.(a) Draw the AS/AD graph associated with this shock.
8. Assume that there is an exogenous decline in the price of imported oil. Using the graphical analysis in this chapter, explain how such a shock would affect output and the price level. Explain the role inflationary expectations play in this adjustment.
My question is (c). Basically, AS curve becoming steeper can be reflected by the value of v bar increases, showing that inflation is more sensitive to SR AD shock. However, this is no impact on AS shock theoretically, as AS shock relates to the change of o bar. So I guess maybe the provided solution is wrong, could u please check it for me? Thanks a lot!
Specific subject - Macroeconomic Analyse the case of a negative supply shock caused by an increase in oil prices and compare with the shock caused by the Covid pandemic. What would be the similarities and differences between the two shocks? What would be the effect of an expansionary economic policy (increase in aggregate demand)? Graph What measures or government intervention would be most appropriate to deal with both types of shocks? Graph Compare the adjustment in both cases with and without government intervention. Graph
Suppose firms become optimistic about futurebusiness conditions and invest heavily in new capitalequipment.a. Draw an aggregate-demand/aggregate-supplydiagram to show the short-run effect of thisoptimism on the economy. Label the new levels ofprices and real output. Explain in words why theaggregate quantity of output supplied changes.b. Now use the diagram from part (a) to show thenew long-run equilibrium of the economy. (Fornow, assume there is no change in the long-runaggregate-supply curve.) Explain in words whythe aggregate quantity of output demanded changesbetween the short run and the long run.c. How might the investment boom affect thelong-run aggregate-supply curve? Explain.
The figure shows the initial LRAS and SRAS curves. - Answer if the expected price is higher than, lower than, or equal to 20? - Additonally, answer how would SRAS curve shift here after: Leftward, Rightward, or No shift?
5-) Question : Variables expressed in terms of are called .. Variables ..... Please select one or more option: a) physcial units / endogenous b) exogenous units / real c) money / nominal d) physical units/ real e) endogenous units / nominal 6-) Question: . implies that an increase in . will increase umw m m a) neutrality of money / inflation / real interest rates b) inflation / prices / both saving and investment c) neutrality of money / the money supply / nominal interest rates d) inflation / prices / real GDP e) neutrality of money / the money supply / real interest rates