A) Suppose the economy is in full employment and that people start using cash less frequently in transactions due to the introduction of new digital currencies. Use the IS-LM and the aggregate demand-aggregate supply models to illustrate graphically the short-run and the long-run effects. Be sure to label the axes, the curves, and the equilibrium values before and after the change. B) Based on your answer in part A, state in words what happens to income, price level, real rate of interest, investment, and consumption in the short run and in the long run.

Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
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A) Suppose the economy is in full employment and that people start using cash less
frequently in transactions due to the introduction of new digital currencies. Use the
IS-LM and the aggregate demand-aggregate supply models to illustrate graphically
the short-run and the long-run effects. Be sure to label the axes, the curves, and the
equilibrium values before and after the change.
B) Based on your answer in part A, state in words what happens to income, price
level, real rate of interest, investment, and consumption in the short run and in the
long run.
Transcribed Image Text:A) Suppose the economy is in full employment and that people start using cash less frequently in transactions due to the introduction of new digital currencies. Use the IS-LM and the aggregate demand-aggregate supply models to illustrate graphically the short-run and the long-run effects. Be sure to label the axes, the curves, and the equilibrium values before and after the change. B) Based on your answer in part A, state in words what happens to income, price level, real rate of interest, investment, and consumption in the short run and in the long run.
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