99.Assume that the long-run aggregate supply curve is vertical a.docx

99.
Assume that the long-run aggregate supply curve is vertical at Y
= 3,000 while the short-run aggregate supply curve is horizontal
at P = 1.0. The aggregate demand curve is Y = 2(M/P) and M =
1,500.
a.
If the economy is initially in long-run equilibrium, what are the
values of P and Y?
b.
If M increases to 2,000, what are the new short-run values of P
and Y?
c.
Once the economy adjusts to long-run equilibrium at M = 2,000,
what are P and Y?
Answer:
a.
P = 1.0; Y = 3,000
b.
P = 1.0; Y = 4,000
c.
P = 1.333; Y = 3,000
100.
1,500.
a.
values of P and Y?
b.

What is the velocity of money in this case?
c.
Suppose because banks start paying interest on checking
accounts, the aggregate demand function shifts to Y =
(1.5)(M/P). What are the short-run values of P and Y?
d.
What is the velocity of money in this case?
e.
With the new aggregate demand function, once the economy
adjusts to long-run equilibrium, what are P and Y?
f.
What is the velocity now?
Answer :
a.
P = 1.0; Y = 3,000
b.
velocity = 2
c.
P = 1.0; Y = 2,250
d.
velocity = 1.5
e.
P = 0.75; Y = 3,000
f.
velocity = 1.5
101.
1,000.
a.
values of P and Y?

b.
Now suppose a supply shock moves the short-run aggregate
supply curve to P = 1.5. What are the new short-run P and Y?
c.
If the aggregate demand curve and long-run aggregate supply
curve are unchanged, what are the long-run equilibrium P and Y
after the supply shock?
d.
Suppose that after the supply shock the Fed wanted to hold
output at its long-run level. What level of M would be required?
If this level of M were maintained, what would be long-run
equilibrium P and Y?
Answer
a.
P = 1.0; Y = 3,000
b.
P = 1.5; Y = 2,000
c.
P = 1.0; Y = 3,000
d.
M = 1,500; P = 1.5; Y = 3,000
102.
The principal method used by the Federal Reserve to change the
money supply is through open-market operations. Use the
aggregate demand–aggregate supply model to illustrate
graphically the impact in the short run and the long run of a
Federal Reserve decision to increase open-market purchases. Be
sure to label: i. the axes; ii. the curves; iii. the initial
equilibrium values; iv. the direction the curves shift; v. the
short-run equilibrium values; and vi. the long-run equilibrium
values. State in words what happens to prices and output in the
short run and the long run.
Answer

In the short run, output increases, while the price level remains
unchanged. In the long run, prices increase and output returns to
the full-employment level.
103.
The advent of interest-earning checking accounts in the early
1980s led many households to keep a larger proportion of their
wealth in checking accounts. Use the aggregate demand–
aggregate supply model to illustrate graphically the impact in
the short run and the long run of this change in money demand.
Be sure to label: i. the axes; ii. the curves; iii. the initial
equilibrium values; iv. the direction the curves shift; v. the
short-run equilibrium values; and vi. the long-run equilibrium
values. State in words what happens to prices and output in the
short run and the long run.
Answer:
In the short run, output decreases, while the price level remains
unchanged. In the long run, prices decrease and output returns
to the full-employment level.
104.
Suppose that droughts in the Southeast and floods in the
Midwest substantially reduce food production in the United
States. Use the aggregate demand–aggregate supply model to
illustrate graphically the impact in the short run and the long
run of this adverse supply shock. Be sure to label: i. the axes; ii.
the curves; iii. the initial equilibrium values; iv. the direction
the curves shift; v. the short-run equilibrium values; and vi. the
long-run equilibrium values. State in words what happens to
prices and output in the short run and the long run.
Answer:
In the short run, output decreases, while the price level
increases. In the long run, prices decrease and output returns to

105.
Suppose that laws are passed banning labor unions and that
resulting lower labor costs are passed along to consumers in the
form of lower prices. Use the aggregate demand–aggregate
supply model to illustrate graphically the impact in the short
run and the long run of this favorable supply shock. Be sure to
label: i. the axes; ii. the curves; iii. the initial equilibrium
values; iv. the direction the curves shift; v. the short-run
equilibrium values; and vi. the long-run equilibrium values.
State in words what happens to prices and output in the short
run and the long run.
Answer:
In the short run output increases, while the price level
decreases. In the long run, prices increase and output returns to
106.
Suppose you are an economist working for the Federal Reserve
when droughts in the Southeast and floods in the Midwest
substantially reduce food production in the United States. Use
the aggregate demand–aggregate supply model to illustrate
graphically your policy recommendation to accommodate this
adverse supply shock, assuming that your top priority is
maintaining full employment in the economy. Be sure to label:
i. the axes; ii. the curves; iii. the initial equilibrium values; iv.
the direction the curves shift; and v. the terminal equilibrium
values. State in words what happens to prices and output as a
combined result of the supply shock and the recommended
Federal Reserve accommodation.
Answer:
The accommodation policy means that the price level is
permanently higher, but output is at the full-employment level.

107.
Throughout much of the 1990s, the United States experienced
declining energy prices. Assume that the U.S. economy was in
long-run equilibrium before these declines began.
a.
Use the aggregate demand–aggregate supply model to illustrate
graphically the short-run and long-run impact of this decline on
output and prices.
b.
If the Federal Reserve attempted to offset this deviation from
the natural rate in the short run, should the money supply be
increased or decreased?
Answer:
Output increases and prices decrease in the short run to point B.
Output and prices return to their original levels at point A in the
long run.
b.
The Federal Reserve must reduce the money supply in the short
run, in order to return the economy to the natural rate, moving
the economy to point C with a permanently lower price level.
108.
The long-run and short-run aggregate supply curves reflect
fundamental differences between long-run and short-run
macroeconomic analysis.
a.
Graphically illustrate the long-run and short-run aggregate
supply curves. Be sure to label the axes.
b.
What determines the level of output in the long run versus the
short run?
c.

How do prices behave differently in the long run and the short
run?
Answer:
a.
b.
In the long run, output is determined by the factors of
production and technology, but in the short run, output is
determined by demand.
c.
In the long run, prices are flexible, but in the short run, prices
are sticky.
109.
The economy of Macroland is initially in long-run equilibrium.
A severe drought causes an adverse supply shock.
a.
What happens to prices and output in the short run?
b.
What would happen to prices and output in the long run if there
is no policy accommodation?
c.
If the Central Bank of Macroland wants to prevent the short-run
changes in price and output, what policy action could it take?
How would the results of this policy action differ from the
prices and output that would result in the long run with no
policy action?
Answer
a.
In the short run, prices increase and output decreases.
b.

With no policy accommodation, both output and prices would
return to their initial long-run equilibrium levels.
c.
The central bank could increase the money supply to return
output to full employment, but this would result in a long-run
equilibrium at a higher price level than the initial long-run
equilibrium.
110.
A central bank reduces the money supply in an economy
initially in long-run equilibrium.
a.
What will happen to output and prices in the short run?
b.
What will happen to unemployment in the short run?
c.
What will happen to output and prices in the long run?
Answer
a.
In the short run, output would decrease with little change in
prices.
b.
In the short run, unemployment will increase.
c.
In the long run, output will return to the full-employment level
at a lower price level.
111.
An oil cartel effectively increases the price of oil by 100
percent, leading to an adverse supply shock in both Country A
and Country B. Both countries were in long-run equilibrium at
the same level of output and prices at the time of the shock. The
central bank of Country A takes no stabilizing policy actions.
After the short-run impacts of the adverse supply shock become

apparent, the central bank of Country B increases the money
supply to return the economy to full employment.
a.
Describe the short-run impact of the adverse supply shock on
prices and output in each country.
b.
Compare the long-run impact of the adverse supply shock on
prices and output in each country.
Answer
a.
In both Country A and Country B, output will decline and the
price level will rise.
b.
In the long run, output in both Country A and Country B will
return to the full-employment level, but the price level will be
higher in Country B than in Country A because of the policy
accommodation.
112.
An economy is initially in long-run equilibrium. The
introduction of an electronic payments system dramatically
reduces the demand for money in the economy.
a.
What is the short-run impact on prices and output of the new
system?
b.
What can the central bank do, if anything, to counteract the
short-run changes in output and prices?
c.
If the central bank does not take any policy actions, what will
be the long-run impact of the electronic payments system on
prices and output?

Answer
a.
In the short run, output will increase as the reduction in money
demand (increase in velocity) shifts the aggregate demand curve
out to the right. There will be an increase in output and little
change in prices in the short run.
b.
The central bank could counteract the decline in money demand
by reducing the money supply, shifting the aggregate demand
curve back to the left.
c.
In the long run with no central bank stabilizing action, output
will return to the full-employment level with a higher price
level.
113.
Explain the meaning of monetary neutrality and illustrate
graphically that there is monetary neutrality in the long run in
the aggregate demand–aggregate supply model. Be sure to label:
i. the axes; ii. the curves; iii. the initial equilibrium values; iv.
the direction the curves shift; v. the short-run equilibrium
values; and vi. the long-run equilibrium values. Explain in
words what your graph illustrates.
Answer
Monetary neutrality is the property that changes in money do
not change real variables. Graphically starting from long-run
equilibrium at A, an increase in the money supply shifts the AD
curve rightward. There is a short run equilibrium at B with
higher real output, but in the long run, prices increase, shifting
the SRAS upward until the new long-run equilibrium is reached
at C, where there is a higher price level, but no change in real

GDP. This illustrates that in the long-run the change in the
money supply does not change the real variable (real GDP).
114.
You are given information about the following leading
indicators. For each indicator explain whether the information
suggests that a recession or expansion should be expected in the
future.
a.
Average initial weekly claims for unemployment insurance rise.
b.
New building permits issued increases.
c.
The interest rate spread between the 10-year Treasury note and
the 3-month Treasury bill narrows.
d.
The Index of Supplier Deliveries falls.
115.
Monetary policy can be either a stabilizing influence on the
economy or a source of instability. Give an explanation for both
possibilities.
Answer
If monetary policy is used to offset changes in aggregate
demand that move an economy away from the natural rate, then
monetary policy actions are stabilizing. If monetary policy
actions move an economy away from the natural rate, either by
increasing or decreasing the money supply when the economy is
in long-run equilibrium, then monetary policy is destabilizing.
116.
How does recession occur? What is a business cycle?
Answer
When an economy experiences a period of falling output and

rising unemployment, the economy is said to be in
recession.The short-term fluctuations in employment and output
are known as the business cycle
117.
What is the relationship between unemployment and real GDP?
Explain Okun’s law.
Answer
GDP and unemployment have a negative relationship because
employed workers help to produce goods and services while
unemployed workers don’t. So increase in the unemployment
rate is associated with decrease in real GDP. This negative
relationship is called Okun’s law.
118.
What is the difference between the short run and the long run?
Answer
In the short run prices are sticky at some predetermined level
because many prices do not respond to changes in monetary
policy, while in the long run prices are flexible and are able to
respond to the changes in supply or demand.
119.
What is aggregate demand? Why is the aggregate demand curve
downward sloping?
Answer
Aggregate demand is the relationship between the aggregate
price level and the quantity of output demanded. The aggregate
demand curve slopes downward because the higher the price
level (P), the lower the level of real balances (M/P), and
therefore the lower the quantity of goods and services demanded
(Y).
120.
According to the IS-LM model, what do an inward and outward

shift in the aggregate demand curve mean?
Answer
An inward shift in the aggregate demand curve shows thst a
decrease in the money supply (M) reduces the nominal value of
output (PY). Thus, the reductions in the money supply shift the
aggregate demand curve inward. Similarly, an increase in the
money supply further increases the nominal value of output. As
a result, the aggregate demand curve shifts outward.
121.
Explain aggregate supply. Why is the aggregate supply curve
vertical in the long run and horizontal in the short run?
Answer
Aggregate supply is the relationship between the price level and
quantity of goods and services supplied. As the firms that
supply goods and services have flexible prices in the long run
and sticky prices in the short run, the relationship depends on
the time horizon.
According to the classical model, the output does not depend on
the price level. So drawing a vertical aggregate supply curve
means the intersection of the aggregate demand curve with this
vertical aggregate supply curve determines the price level in the
long run. It implies that the level of output is independent of the
money supply.
In the short run prices are sticky to the price level, so the short
run aggregate supply curve is horizontal. The short run
equilibrium of the economy is the intersection of the aggregate
demand curve and the horizontal short run aggregate supply
curve.
122.
How does an economy make a transition from short run to long
run?
Answer

Suppose that an economy is initially in the long run. There are
three curves available: the aggregate demand curve, the long
run aggregate supply curve, and short run aggregate supply
curve. In the long run, the economy finds itself at the
intersection of the long run aggregate supply curve and the
aggregate demand curve. Because prices have also adjusted to
this level, the short run aggregate supply curve intersects this
point as well.
123.
Explain the concepts of shocks in aggregate demand and
aggregate supply.
Answer
Changes in the aggregate demand and supply curves cause
fluctuations in the economy as a whole. The exogenous events
that create shifts in these curves are called shocks. A shock that
shifts the aggregate demand curve is called demand shock,
while a shock that shifts the aggregate supply curve is called a
supply shock.
124.
What is stabilization policy?
Answer
The demand and supply shocks disrupt the economy by pushing
output and employment away from their natural levels. The
policy actions aimed at reducing the severity of short run
economic fluctuations are called stabilization policy.
125.
Define the terms: i) adverse supply shocks, ii) favorable supply
shocks.
Answer
i) An adverse supply shock is when events push costs and prices

upward, for example, drought that destroys crops, an increase in
union aggressiveness, etc.
ii) Favorable supply shocks are those that cause costs and prices
to fall, for example, the break-up of an international oil cartel.
Running head: FIELD
1
FIELD
3
Field Experience A
Tyesa Wilson
SPD 530: Assessment and Eligibility in Special Education
March 13, 2019
Field Experience A
I really enjoyed this interview. It gave me insight on how it is
working with the response to intervention (RTI) process. She
went into details explaining each level of the RTI. I learned that

during each level, a service is added. They are going more in-
depth to understand the student’s performance and what needs
to be done to help the child reach his/her potential in the
classroom. Each level of testing is administered differently.
They are each administered by qualified personnel, but as the
student progresses to another level the setting is different. Level
one can be done while engaging instruction within the
classroom. Level two is administered in a small-group setting. It
can be given in the classroom or in another setting. Level three
is administered on a more personal level. The student is
observed doing different tasks to measure there are of need and
they are normally given psychological testing. It is important as
classroom teachers to do progress monitoring. This helps us
understand of the students are making gains or if they need
extra help. Progress monitoring is important because this helps
determine if a students needs to move to the next level of RTI. I
learned that results are sent to various stakeholders through
emails. This is something I did not know. I would have thought
there would be a more secure way of sending the results. I
thought that was interesting. Results are also posted on the
State Education websites. The information provided to me
during this interview would be helpful throughout my career. I
learned strategies and more information on my role as a
classroom teacher working with RTI. I will apply the
information gathered to my work.

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