ECON 3440 Lecture Notes - Lecture 29: Canadian Dollar, Taylor Rule
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18 Nov 2017
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This will shift is to the right as it will net exports. When (cid:540)o is shift to is1 . If central bank does not change r then output would go to yd . But central bank by r to rh manage to stabilize y to some extent . Effect of in (cid:540)o & rt on is curve. Recall: (cid:540)=(cid:540)o (cid:540)r (r-rt) if people lose confidence in the long run value of. Canadian dollar then they expect ca$ to have a lower value in long run. So they expect that in long-ru(cid:374) they"ll (cid:374)eed (cid:373)ore to (cid:271)uy 1, (cid:540)o . This will net exports & hence (cid:449)e"ll ha(cid:448)e larger de(cid:373)a(cid:374)d for ea(cid:272)h r: is (cid:449)ill shift to right. Aside: recall the quantity theory which we did before midterm was for long-run. There we had e = m/mf x v/vf x yf/y. In oil price y. this e. this is long run.
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b) | The LRAS curve is drawn as a vertical line at potential output (Y*) to indicate that
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c) | Stagflation arises in the context of the AD-AS model when some external factor causes
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d) | If the SRAS curve is positively sloped, then a decrease in the demand for Canadian-made goods in Europe will lead to _____ in the price level, in the short run.
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e) | Which of the following will shift the aggregate demand curve to the right?
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f) | Suppose a stock market crash decreases the stock of household wealth and therefore causes autonomous consumption to fall. Which of the following is the likely result?
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g) | An economy is characterized by the AD equation P = 200 ? 0.02Y, SRAS equation P = 100 and LRAS equation Y* = 5000. In the absence of any change in policy or exogenous shocks, this economy will achieve a long-run price level of
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h) | The AD-AS model depicts a self-correcting economy. This means that the price level in the model adjusts automatically in response to a(n) _____ gap, so as to eliminate the _____ gap in the long run, without requiring any help from government policies.
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i) | The aggregate demand curve shows
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j) | Consider an economy initially at long-run equilibrium with output (Y) equal to potential output (Y*). If the SRAS is positively sloped, then a shift to the right of the AD curve will lead to _____ in the price level, in the short run. In the long run, the SRAS curve will shift to the _____ and the equilibrium will be at __________.
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