1- In the monetary intertemporal model seen in class, explain and illustrate graphically how decreases in z and z' affect the economy using output supply and demand, labour supply and demand and money supply and demand. (Assume that the direct effect of a decrease in z on the supply of goods is larger that the anticipated decrease in future TFP, z'). 2- Explain the effects on real interest rate, wages, aggregate output, prices, employment, consumption, and investment 3- Suppose that the government decides to print money to finance a lump sum transfer of money to the representative consumer. Explain and illustrate graphically what would happen in the goods market, output market and money market as a result of this one-time printing of money.
1- In the monetary intertemporal model seen in class, explain and illustrate graphically how decreases in z and z' affect the economy using output supply and demand, labour supply and demand and money supply and demand. (Assume that the direct effect of a decrease in z on the supply of goods is larger that the anticipated decrease in future TFP, z'). 2- Explain the effects on real interest rate, wages, aggregate output, prices, employment, consumption, and investment 3- Suppose that the government decides to print money to finance a lump sum transfer of money to the representative consumer. Explain and illustrate graphically what would happen in the goods market, output market and money market as a result of this one-time printing of money.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:1- In the monetary intertemporal model seen in class, explain and illustrate graphically how
decreases in z and z' affect the economy using output supply and demand, labour supply
and demand and money supply and demand. (Assume that the direct effect of a decrease
in z on the supply of goods is larger that the anticipated decrease in future TFP, z').
2- Explain the effects on real interest rate, wages, aggregate output, prices, employment,
consumption, and investment
3- Suppose that the government decides to print money to finance a lump sum transfer of
money to the representative consumer. Explain and illustrate graphically what would
happen in the goods market, output market and money market as a result of this one-time
printing of money.
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