1. Use the IS-LM model to analyze the effects of a permanent increase in the nominal money supply. (a) Draw two sets of diagrams, the first describing the short-run effects (before prices have ad- justed) and a second describing the long-run effects (after prices have adjusted). (b) What happens to real money supply in the short-run? And in the long-run?
1. Use the IS-LM model to analyze the effects of a permanent increase in the nominal money supply. (a) Draw two sets of diagrams, the first describing the short-run effects (before prices have ad- justed) and a second describing the long-run effects (after prices have adjusted). (b) What happens to real money supply in the short-run? And in the long-run?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![1. Use the IS-LM model to analyze the effects of a permanent increase in the nominal money supply.
(a) Draw two sets of diagrams, the first describing the short-run effects (before prices have ad-
justed) and a second describing the long-run effects (after prices have adjusted).
(b) What happens to real money supply in the short-run? And in the long-run?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb9220109-f0f2-41fd-8526-5fedac3bce3a%2Fd5a82659-7f33-4fc6-a154-6f96e9a1b256%2F3zgynd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. Use the IS-LM model to analyze the effects of a permanent increase in the nominal money supply.
(a) Draw two sets of diagrams, the first describing the short-run effects (before prices have ad-
justed) and a second describing the long-run effects (after prices have adjusted).
(b) What happens to real money supply in the short-run? And in the long-run?
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