3. Consider the situation where the inflation gap for a country is currently (and has been) at zero, and the central bank changes the length of repo trades from 1 day to 7 days without changing the repurchase price. (a) Is the associated policy expansionary, contractionary, or neither? Briefly explain and support your explanation with the appropriate equation(s). (b). Is the associated policy be inflationary, deflationary, or neither if there was no change in y" or r*? Briefly explain and support your explanation with the appropriate equation(s).

3. Consider the situation where the inflation gap for a country is currently (and has been) at zero, and the central bank changes the length of repo trades from 1 day to 7 days without changing the repurchase price. (a) Is the associated policy expansionary, contractionary, or neither? Briefly explain and support your explanation with the appropriate equation(s). (b). Is the associated policy be inflationary, deflationary, or neither if there was no change in y" or r*? Briefly explain and support your explanation with the appropriate equation(s).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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