Question

A positive oil price shock (an inflation shock) has occurred. Using the AS/AD framework, please compare...

A positive oil price shock (an inflation shock) has occurred. Using the AS/AD framework, please compare
and contrast the effect of this inflation shock on the economy using the standard AD and then using the Taylor AD. You must use an
AS/AD diagram to show your answer for each (Standard AD and Taylor AD).

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

in standard AD we have only focus on the AD, AS, price and output. but in Taylor's it not only look on those as pects but also measures the dynamic effect mechanism very in acordance to shock.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a. Consider a positive AD shock (i.e. increase in the AD curve) hitting the economy. First,...
a. Consider a positive AD shock (i.e. increase in the AD curve) hitting the economy. First, give examples of such a shock. Second, use the AS/AD diagram to show both the short-run and long- run effects of the shock. Third, explain step by step the adjustment after the shock, i.e. both the short run deviation from LRAS and the self-correction back to LRAS assuming policymakers do NOT respond to the shock. b. Now re-consider part a., assuming that the policymakers...
1. Suppose the economy is hit by an unexpected oil price shock that permanently raises oil...
1. Suppose the economy is hit by an unexpected oil price shock that permanently raises oil prices by $50 per barrel. (This is a temporary increase in o¯ in the model: the shock o¯ becomes positive for one period and then goes back to zero.) (a) Using the full short-run model, explain what happens to the economy in the absence of any monetary policy action. i. How does the Phillips curve change? What happens to output and inflation? ii. How...
In this question, you should analyze the effect of price control to keep low inflation rate...
In this question, you should analyze the effect of price control to keep low inflation rate in the AD-AS framework. For simplicity, assume that the economy is in a full employment equilibrium initially. The government controls prices in stores to avoid inflation. Namely, they do not allow the changes in prices in stores. What would happen to output and the price level when the central bank increases money supply? Explain using the AD-AS diagram. What would happen to output and...
For the questions on the following pages call the initial pre- shock point a and call...
For the questions on the following pages call the initial pre- shock point a and call the aftershock point b. I should see only points a and b in both graphs in the left side where you show the shock on the above curve on the above graph where you show the shock on the AE curve on the above graph, and on the Philips curve on the lower graph. (Both drawn and labelled carefully). In the first part of...
Draw the Aggregate supply (AS) curve. On this curve you must demonstrate maximum capacity, wage-price spiral,...
Draw the Aggregate supply (AS) curve. On this curve you must demonstrate maximum capacity, wage-price spiral, the range of full employment and unemployment, please explain what happen to the inflation rate along the AS curve. Explain wage-price spiral using two to three sentences. Suppose the economy experienced a negative shock such as a hurricane, how will this affect the aggregate supply curve, please demonstrate this graphically? Suppose there is an increase in the population how will this affect the AS...
I only need part B, part A is for reference. A) Assume the economy is at...
I only need part B, part A is for reference. A) Assume the economy is at full employment. Use the IS-LM/ AD-AS model to show the short-run and long-run impacts of a positive demand shock such as an increase in business confidence and investment spending on: the real interest rate (r), real GDP (Y), unemployment (U), consumption spending (C), the nominal money supply (M), the price level (P) and the real value of the money supply(M/P). You must present properly...
A. Aggregate Demand, Aggregate Supply, and Equilibrium For a hypothetical economy, the aggregate-demand (AD), short-run aggregate...
A. Aggregate Demand, Aggregate Supply, and Equilibrium For a hypothetical economy, the aggregate-demand (AD), short-run aggregate supply (AS), and long-run aggregate-supply (ASLR) schedules are as follows. The schedules show the GDP price deflator (P) versus real GDP (Q), with Q measured in billions of constant dollars. P AD AS ASLR 80 30 22 30 90 28 24 30 100 26 26 30 110 24 28 30 120 22 30 30 130 20 32 30 A1. GRAPHS: Graph the AD, AS,...
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram...
Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to “Calculate,” you must show how you arrived at your final answer. Assume gadgets are sold in a competitive market, the equilibrium price is $6, and the equilibrium quantity is 500 units. (a) Using the numerical values above, draw a correctly labeled graph of the market...
A consumer has a demand function for good 2, ?2, that depends on the price of...
A consumer has a demand function for good 2, ?2, that depends on the price of good 1, ?1, the price of good 2, ?2, and income, ?, given by ?2 = 2 + 240/(??2) + 2?1. Initially, assume ? =40, ?2 = 1, and ?1 = 2. Then the price of good 2 increases to ?2′ = 3. a) What is the total change in demand for good 2? b) Calculate the amount of good 1 consumed at the...
Assume the economy is in a recession. The government has a high level of debt and...
Assume the economy is in a recession. The government has a high level of debt and wants to set a balanced budget, that is, G = T. You will be guided to show how the government can achieve a fiscal stimulus effect on GDP whilst keeping the budget balanced. To answer the question, assume that the economy is closed (there are no exports or imports) and the government collects lump-sum taxes. Now take the following steps: (a) Show how this...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT