Question
Consider an exogenous decrease in real money demand (e.g., a substantial increase in credit card usage) in a closed economy. Assume that prices are fixed
Consider an exogenous decrease in real money demand (e.g., a substantial increase in credit card usage) in a closed economy. Assume that prices are fixed in the short run.
(a) Will the interest rate increase in the short run?
(b) Will income increase in the short run?
(c) Will the price level increase in the transition from the short run to the long run (absent any policy response)?
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Econometric Analysis
Authors: William H. Greene
5th Edition
130661899, 978-0130661890
