EBK ECONOMICS
4th Edition
ISBN: 8220101443649
Author: KRUGMAN
Publisher: YUZU
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Chapter 30, Problem 6P
To determine
Concept Introduction:
Expansionary Monetary Policy: This policy is used by the government to expand the money supply in the economy. Money supply is increased by reducing the interest rate, as lower interest rates will encourage people to borrow more.
Contractionary Monetary Policy: This policy is used by the government to contract the money supply from the economy. Money supply is reduced by increasing the interest rate, as higher interest rates will de-motivate people to borrow.
Inflationary gap: At the level of full employment, if the value of the real
Recessionary gap: At the level of full employment, if the value of the potential GDP is greater than the value of the real GDP, it leads to emergence of recessionary gap.
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