Monetary policy in the long run Consider a hypothetical economy that produces at its long-run macroeconomic equilibrium at a price level of 100. Suppose that the central bank in this economy is expanding the money supply by 4% each year. In order for the price level to be maintained at 100, real GDP must grow at an annual rate of (percentage?) if the velocity of money remains constant. Suppose the central bank enacts an unanticipated restrictive monetary policy. As a result, the supply of loanable funds (decreases/ Increase) , leading to a (rise/fall) in short-term interest rates. This in turn (reduces/raises) the opportunity cost of holding money. As people hold (Lower/ higher) money balances, the (velocity of money/ Price
6.
Consider a hypothetical economy that produces at its long-run
Suppose that the central bank in this economy is expanding the money supply by 4% each year. In order for the price level to be maintained at 100, real GDP must grow at an annual rate of (percentage?) if the velocity of money remains constant.
Suppose the central bank enacts an unanticipated restrictive monetary policy. As a result, the supply of loanable funds (decreases/ Increase) , leading to a (rise/fall) in short-term interest rates. This in turn (reduces/raises) the
True or false?: The shift in monetary policy exerts an impact on output and the general level of prices with a time lag.
6. Monetary policy in the long run
Consider a hypothetical economy that produces at its long-run macroeconomic equilibrium at a price level of 100.
Suppose that the central bank in this economy is expanding the money supply by 4% each year. In order for the price level to be maintained at 100, real GDP must grow at an annual rate of (percentage?) if the velocity of money remains constant.
Suppose the central bank enacts an unanticipated restrictive monetary policy. As a result, the supply of loanable funds (decreases/ Increase) , leading to a (rise/fall) in short-term interest rates. This in turn (reduces/raises) the opportunity cost of holding money. As people hold (Lower/ higher) money balances, the (velocity of money/ Price level/ aggregate output) will (rise/fall).
True or false?: The shift in monetary policy exerts an impact on output and the general level of prices with a time lag.
6. Monetary policy in the long run
Consider a hypothetical economy that produces at its long-run macroeconomic equilibrium at a price level of 100.
Suppose that the central bank in this economy is expanding the money supply by 4% each year. In order for the price level to be maintained at 100, real GDP must grow at an annual rate of (percentage?) if the velocity of money remains constant.
Suppose the central bank enacts an unanticipated restrictive monetary policy. As a result, the supply of loanable funds (decreases/ Increase) , leading to a (rise/fall) in short-term interest rates. This in turn (reduces/raises) the opportunity cost of holding money. As people hold (Lower/ higher) money balances, the (velocity of money/ Price level/ aggregate output) will (rise/fall).
True or false?: The shift in monetary policy exerts an impact on output and the general level of prices with a time lag.
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