关键词 > Macroeconomics代写
Macroeconomics Principles Assignment 4
发布时间：2022-11-27
Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit
Macroeconomics Principles
Assignment 4
Introductory Macroeconomics
Fall 2022
Instructions: Attempt two of the following exercises. Justify your answers using concepts developed in class and in the chapters of the lecture notes for this course.
Exercise 1
a) Compare the monetary policy advocated by the monetarists and the current monetary policy of the Bank of Canada.
b) Why is it, with a few exceptions, that the current monetary policy of the Bank of Canada can stabilize economic activity and real GDP while the policy does not have as a goal the stabilization of economic activity?
c) Bonus: What is the exception and why the Bank of Canada policy would fail in this case?
d) Bonus: Would the monetary policy of the monetarists be more appropriate in this case?
Exercise 2
Consider an economy with the following schedules of aggregate demand and short run aggregate supply curves. The current expected inflation rate is 2%.
|
Inflation rate (1) |
Aggregate quantity demanded G=10 (2) |
Aggregate quantity demanded G= 3 (3) |
Aggregate quantity Supplied expected inflation rate = 2% (4) |
Aggregate quantity Supplied expected Inflation rate = 0% (5) |
|
-2 |
107 |
|
94 |
97 |
|
-1 |
105.5 |
|
95.5 |
98.5 |
|
0 |
104 |
|
97 |
100 |
|
1 |
102 |
|
98.5 |
101.5 |
|
2 |
100 |
|
100 |
103 |
|
3 |
98 |
|
101.5 |
104.5 |
|
4 |
96 |
|
103 |
106 |
|
5 |
94 |
|
104.5 |
107.5 |
|
6 |
92 |
|
106 |
109 |
a) Draw carefully for yourself on a sheet of paper the short run aggregate demand SAD curve corresponding to G = 10 and the short run aggregate SAS curve corresponding to an
expected inflation rate equal to 2%. What is the full employment real GDP? Draw the long run aggregate supply LAS curve on the same diagram. You need not submit the diagram
Find the short run equilibrium real GDP, inflation rate, and the growth rate of nominal wages. Is there a deflationary gap or an inflationary gap? Is the equilibrium inflation rate equal to the expected inflation rate? What is full employment real GDP?
Suppose that government expenditures decrease by 7 from 10 to 3.
Assignment 4, Introductory Macroeconomics intry_mac_assign_4_win_2016 11/19/2022 7:09 PM 2
b) Fill out column (3) of the Table. Find the short run equilibrium real GDP, inflation rate, and the growth rate of nominal wages.
c) Is there a deflationary gap or an inflationary gap? What should happen to the real wage? Only the direction of change of the real wage is required.
Compare your answers to b) and c). Explain how the economy could operate and produce a GDP as in c) that is different from its full employment level.
After experiencing the new equilibrium inflation rate and its effect on their real wage, workers realize that the equilibrium inflation rate has changed, and their real wage has changed. Suppose that they change their expected inflation rate by the same amount as the change in the equilibrium inflation rate.
d) What motivates the workers to accept this change in their expected inflation rate?
e) Find the new equilibrium real GDP and inflation rate.
f) Is there a deflationary gap or an inflationary gap? What happened to the gap?
g) Is this equilibrium dangerous for the economy and why or why not?
Exercise 3
Business confidence in the economy has plunged to a near record low, suggesting that a fall in investment in new plants and equipment will follow, the Conference Board of Canada reported yesterday. … The latest survey, conducted in the first three weeks of October, found that business leaders were much more concerned about the economy and their future financial situations than they had been in the summer survey. Expectations about future profitability also fell. “The ongoing financial and equity market mayhem is having a significant impact on business leaders’ views about near-term economic prospects,” it said, noting the survey found that nearly 70 percent believed that the economy would be in worse shape in six months. Only 12 percent, and probably those that benefit from a weaker Loonie, believed conditions would improve, it said, adding that ratio is the “worst” since the final quarter of 1990. Gazette (Montreal), November 11, 2008
Answer the following questions. Justify your answers.
a) Explain and draw a graph to illustrate how declining business confidence can change the short-run equilibrium real GDP and inflation rate. Which aggregate variable the loss of
confidence would impact first? What happens to each one of the following aggregate variables:
real GDP,
C,G,I, X, Mp, and the inflation rate?
b) If the economy was operating at full-employment equilibrium, describe the state of equilibrium after the fall in business confidence. In what way might business expectations have a self- fulfilling prophecy?
c) Explain how the economy can adjust in the long run to restore full-employment equilibrium and draw a graph to illustrate this adjustment process.
