The U.S. economy has the long-run aggregate supply curve Ÿ" = Ã+K +H where His the growth rate of human capital (the other terms are defined as usual). In the questions below, you can type YL for , YD...

Extracted text: The U.S. economy has the long-run aggregate supply curve Ÿ" = Ã+K +H where His the growth rate of human capital (the other terms are defined as usual). In the questions below, you can type YL for , YD for y, YS for yS, Y for y, and P for p. 1. Initially, A = 1, and H = K = 0. Assume also that initially the rate of money growth is 3 and the velocity of money is not changing. • a) Write down the aggregate demand curve: b) Write down the long-run aggregate supply curve: • c) In the long-run equilibrium. the rate of inflation is the rate of GDP growth is d) Write down the short-run aggregate supply curve: 2. The arrival of the novel coronavirus in the U.S. causes human capital to persistently decline as people fall ill. F falls to -4. Assume all other parameters (A, m etc.) remain unchanged. a) By the time the economy reaches the new long-run equilibrium, which curves have changed? b) In the new long-run equilibrium.. o the rate of inflation is the rate of GDP growth is c) Write down the short-run aggregate supply curve


Extracted text: 3. Under heavy pressure from high-ranking politicians, the Fed cuts interest rates by increasing the rate of money growth to 7. a) In the immediate aftermath of this shock, which curves shift? • b) Write down the equations of the curve(s) that have shifted: c) In the short-run equilibrium... the rate of inflation is o the rate of GDP growth is 4. Assume that both the shock to the growth rate of human capital (H = -4) and the growth rate of the money supply (M = 7) are permanent. Then eventually the economy will move to a new (final) long-run equilibrium. • a) Which curve(s) must shift to move the economy to the this final long-run equilibrium? State your answer and explain, intuitively, what causes it/them to shift. b) In the final long-run equilibrium. o the rate of inflation is the rate of GDP growth is c) Write down the short-run aggregate supply curve: 5. A recent opinion column had the headline "The Fed Can't Save Us From the Coronavirus." • a) Given your answer to Questions 3 and 4 above (e.g. given that the virus affects only human capital), is this statement accurate? Explain in 1 or 2 sentences. b) Suppose that instead of affecting human capital, the coronavirus affected only the velocity of money (by reducing consumption growth č as people stay home). If that were the only impact of the virus, would your answer be different? Explain in 1 or 2 sentences.