Question 5A Starting from a baseline Long Run Steady State Equilibrium (LRSSE), the federal reserve increases interest rates. i. What kind of policy is this (Monetary or fiscal; ii. iii. expansionary or contractionary? How do you know? As a response which curve will start shifting in which direction? Why? How will this policy make the economy move away from the baseline Long Run Steady State Equilibrium (how would it change unemployment or price level relative to the long run steady state equilibrium )? iv. Draw a graph to show the changes to the long run steady state equilibrium (LRSSE).
Question 5A Starting from a baseline Long Run Steady State Equilibrium (LRSSE), the federal reserve increases interest rates. i. What kind of policy is this (Monetary or fiscal; ii. iii. expansionary or contractionary? How do you know? As a response which curve will start shifting in which direction? Why? How will this policy make the economy move away from the baseline Long Run Steady State Equilibrium (how would it change unemployment or price level relative to the long run steady state equilibrium )? iv. Draw a graph to show the changes to the long run steady state equilibrium (LRSSE).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 5A
Starting from a baseline Long Run Steady State
Equilibrium (LRSSE), the federal reserve increases interest
rates.
i. What kind of policy is this (Monetary or fiscal;
ii.
iii.
expansionary or contractionary? How do you know?
As a response which curve will start shifting in which
direction? Why?
How will this policy make the economy move away
from the baseline Long Run Steady State Equilibrium
(how would it change unemployment or price level
relative to the long run steady state equilibrium )?
iv. Draw a graph to show the changes to the long run
steady state equilibrium (LRSSE).
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