Consider the IS-LM model. Suppose the economy of Economica is initially at the general equilibrium. Suppose further that the central bank of Economica considers the increase of the nominal money supply as a policy tool and hires you as a consultant. Explain and show graphically how an increase in the nominal money supply would affect the labor, goods, or the asset market. Explain and show graphically how an increase in the nominal money supply would affect the short-run equilibrium. Explain and show graphically how an increase in the nominal money supply would affect the general (long-run) equilibrium. The use of monetary policy is highly debated among classical and Keynesian economists. Where do they agree and where do they disagree with respect to monetary policy?
Consider the IS-LM model. Suppose the economy of Economica is initially at the general equilibrium. Suppose further that the central bank of Economica considers the increase of the nominal money supply as a policy tool and hires you as a consultant. Explain and show graphically how an increase in the nominal money supply would affect the labor, goods, or the asset market. Explain and show graphically how an increase in the nominal money supply would affect the short-run equilibrium. Explain and show graphically how an increase in the nominal money supply would affect the general (long-run) equilibrium. The use of monetary policy is highly debated among classical and Keynesian economists. Where do they agree and where do they disagree with respect to monetary policy?
Chapter1: Making Economics Decisions
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Q1. Consider the IS-LM model. Suppose the economy of Economica is initially at the general equilibrium. Suppose further that the central bank of Economica considers the increase of the nominal money supply as a policy tool and hires you as a consultant.
- Explain and show graphically how an increase in the nominal money supply would affect the labor, goods, or the asset market.
- Explain and show graphically how an increase in the nominal money supply would affect the short-run equilibrium.
- Explain and show graphically how an increase in the nominal money supply would affect the general (long-run) equilibrium.
- The use of
monetary policy is highly debated among classical and Keynesian economists. Where do they agree and where do they disagree with respect to monetary policy?
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