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1.Explain the concept of rational expectations. How does this view on how expectation is formed differ from the assumption that workers formed expectations of current and future price levels based on past information about prices?
Rational expectations assume that people learn from past mistakes. Implications for economic policy. The impact of expansionary fiscal policy will be different if people change their behavior because they expect the policy to have a certain outcome. For example, if expansionary fiscal policy causes inflation last year, they will factor this into future expectations. Therefore, in the second year, if the government pursue more fiscal stimulus, unemployment may not fall at all, because people immediately adjust their inflation expectations in response to government policy.
The reason why expectation is formed from assumption is differ from formed expectations of current and future price levels based on past information about prices is because of historical data on the variable of interest has been found to be less logically satisfactory than alternative assumptions that have formed the basis of the competing hypothesis of rational expectations. Besides, value of the expectation/ coefficient may differ for various group of economic agents, individual and over time. In addition, expectation may lag actual when there change in trend. Changes in trend of a variable of interest may emanate from the behavior of related variable that affected by broader factors such as recent global financial crisis. Those, expected value not only depend on its own past values but also together with past, present and expected values of others related variable.
2. Compare the effect of expansionary monetary policy between the new Classical and Keynesian on output and employment.

KEYNESIAN
In Keynesian view, it is assuming that money wage is flexible, and labor supply (Ns) is assuming to depend on the expected real wage (W/Pe).

Expansionary monetary policy such as increase in money supply shift AD curve to the right from (AD to AD1 and AD2). These cause output rise from (Y0 to Y1 to Y2) and rise in employment from (N0 to N1 to N2) as well as price level rise from (P0 to P1 to P2). As employment increase, the unemployment rate will reduce. This induce the increase in money wage from (W0 to W1 to W2)
As increase in Ad cause rise in price level then other variable remain equal, the fasters the growth in Ad cause higher rate in inflation. Keynesian model implies that their trade-off between inflation and unemployment.

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As Philip curve explain that the more quickly AD growth, the large rightward shift in AD, and other variable being equal, the faster rate of growth in output and employment. For given labor force, unemployment rate will be lower the as the fasters rate of growth in AD.
Increase in the money supply leads to an increase in employment and output in the short- run, until labor supplier correctly perceives the increase in price level that result from expansionary monetary policy action. Keynesian view that expectation about price are backward-looking so increase in money supply will affect output and employment.
NEW CLASSICAL
In the new classical model, it is assuming that people are behave on rational expectation. Rational expectations imply that the workings of the economy are understood, and that fiscal and monetary policy will be anticipated rendering the policy ineffective. Where there is adequate information, people form beliefs about the economic future that are reasonably accurate. Based on their judgments, people adjust their economic behavior accordingly. As labor market were very competitive, new information is quickly absorbed. These variables expected include level on money supply, (Me), government spending (Ge), tax collection (Te), autonomous investment (Ie) and other possible variables.

Initially, assume aggregate demand (AD), aggregate supply (AS), labor demand (Nd) and labor supply (Ns) with actual and expected variable is zero with output (Y0), employment (N0), money wage (W0) and price level (P0).

When there is expansionary in monetary policy, there will be an increase in money supply and shift the AD to the right from AD(M0) to AD(M1). These changes also cause output rise from Y0 to Y’1 and rise in price level from P0 to P’1. With the rise in price, labor demand (Nd) would shift to the right from Nd(P0) to Nd(P’1). Increase in price also will increase money wage from W0 to W’1. New equilibrium moves from point A to B.

However, because the increase in money supply was anticipated, there would also increase in the expected money supply because of rational expectation. Labor supplier know that the inflationary effect occurs because of the increase in money supply. This instance cause labor supply (Ns) and AS shifting to the left to Ns (Me 1) and AS (Me1).
As decline in AS, it put further upward pressure on the price level and labor demand shift to Nd (P’1). The new equilibrium at point C where output and employment return to their initial level at Y0, N0 respectively with price level permanently higher at P1 and money wage W1.
New Classical believed that anticipated changes in the money supply do not affect real output and employment in the labor market because people assume have perfect information. With these information, people form rational expectation on upcoming events in the future so economic agents will adjust quickly to eliminate shortages and surpluses in the market.

When increase in the money supply is unanticipated due to monetary surprise, increase in money supply shift AD from Ad (M0) to AD(M1). As price level rises to P’1, labor demand also shifts to the right to Nd(P’1). As money supply is unanticipated, it does not affect the labor supplier’s expectation. Price level will take place in current period, so the labor supply does not shift. These cause changes in output and employment which output rise from Y0 to Y1 and employment will also rise from N0 to N1 and money wage rise to W’1. New equilibrium moves from A to B.

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1.1 Background of Study
From the focal point of diverse and dynamic nature of modern development, the demand for energy has been consistently increasing from time to time. By this declaration, relying on fossil fuels alone will continue to add to the problem of unsustainable rural energy planning and management especially in developing countries.
This project is captioned the impact of integrating renewable energy sources for rural electrification optimization using an intelligient agent. The project is emphasized on enhancing stable power supply in rural area with Amoli community in Awgu town of Enugu state, NIgeria as a case study. The renewable energy sources used in this project are solar and wind plus the grid. Amoli have these two in aboundace when compared to other existing renewable energy. The problem faced in this rural area are lack of power supply or intermittent power supply which has led to the reduction of development in the area.
Wind and solar electrical power systems are recently getting lot of attention, because they are cost competitive, environmental clean and safe renewable power source, as compared to fossil fuel and nuclear power generation.
The reason for the world wide interest in developing solar and wind generation plants is the rapidly increasing demand for electrical energy and the consequent depletion of fossil fuels, namely; oil and coal , whose reserves are limited. The depletion reserves, increase in demand, and certain factors in world politics have together contributed to a sharp rise in the cost of thermal power generation. Many places also do not have the potential for generating hydro power. Nuclear power generation was once treated with great optimism, but with the knowledge of the environmental hazards associated with the possible leakage from nuclear power plants, most countries have decided not to install them anymore.
The growing awareness of these problems led to heightened research efforts for developing alternative sources of energy for generation of electricity. The most desirable source would be one that is non- pollutant, available in abundance and renewable and can be harnessed at an acceptable cost in both large scale and small scale systems. The most promising source satisfying all these requirements is solar and wind, a natural source energy . Solar and Wind energy conversion may be mechanical or electrical in nature, hut the present focus is on electricity generation.
Amoli is a hilly area despite occupying a region low in altitude which rises 350 feet above sea level. It is a transitional area between open grass land and tropical forest and has an average annual rainfall of seventy-seven inches (198cm). The population of Amoli is estimated at 10,477 by 2013.
Energy is an integral part of a society and plays a pivotal role in its socio-economic development by raising the standard of living and the quality of life.

1.2 Problem Statement
The availability of renewable energy sources is limited, the shortage results in frequent power break-downs and disrupts daily life, man power losses in offices, agricultural activities and adversely affect the industrial production and thereby the economy.
The irregular power supply in Amoli and Enugu State as a whole has been a persistent battle between customers and energy suppliers. This is evident in the most recent tussle between the major energy supplier EEDC (Enugu Energy Distribution Company) and Enugu youths on the epileptic nature of the energy supply coupled with the deliberate issuance of inflated bills to customers.
Fossil fuels are running out and people are worried about the way burning fossil fuels damages the environment. For instance, the green house effect, acid rain and effect on the ozone layer. The greenhouse effect is caused by an increase in the concentration of gases such as carbondioxide (C02) in the earth’s atmosphere.
Other problems include:
i. Decline in generation due to Niger delta vandalisation
ii. Ageing of some of the generating units due to lack of maintenance
iii. Technical expertise
iv. Inadequate supply of transformers.
The critical loads like television, lightening, radio, fans, VCD and other type of compact disc that make life worth living are not secured as a result of intermittent power supply.
The Commonwealth Business Council (CBC), said that Nigeria was losing $100 billion yearly due to lost output and high costs for local business.
All these points to the urgent need for the local government/state to diversify/explore other sources of energy generation to save her citizens from such impasse.

1.3 Aim and Objectives
The aim of this proposed project is to analyze the impact of integrating renewable energy sources in Amoli thereby recommending the most efficient renewable energy source. This will be achieved by the following objectives:
i. To determine available sources of renewable energy in Amoli
ii. To analysis the energy demand for a cluster of building/facilities in Amoli
iii. To optimize the energy demand for a cluster of building facilities in Amoli
iv. To design an optimized intelligent agent for an effective power stability
v. To Create a chart of the required number of recommended energy system to meet the various energy demand level.
vi. To design a Simulink model for the impact of integrating renewable energy sources for rural electrification optimization using an intelligent agent.

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1.4 Significance of the Study
The relevance of this study in modern society cannot be overemphasized, most especially in a country like Nigeria where power supply is more of a luxury than a basic social amenity. It was often thought that renewable energy sources such as solar systems for instance are expensive and inefficient. However, studies have shown that the relatively high initial cost in harnessing the renewable energy from the sun becomes negligible over the life span of usage. Integrating renewable energy system provides the following impact/benefits.
i. It enhances the availability of energy and electricity to all communities.
ii. Environmentally safe and friendly.
iii. Enhances the creation of wealth and power reduction by offering potential for new jobs for both rural and urban dwellers.
iv. Encourage large scale agriculture.
v. Helps in mitigating climate change.

1.5 Scope of the Study
This project is limited at analyzing the various impact of integrating renewable energy sources predominant for rural settlements. Thereby contributing to the socio-economic development of the community.

1.6 Organization of the work
This dissertation report is divided into five chapters. The first chapter is an introduction of the work done. The second chapter is the literature review of the related work. Chapter three deals with methodology, design and implementation of the work done while chapter four is the data presentation and analysis of the work and chapter five is the conclusion and recommendations of the work done.