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It is 2023. Sweden has a meeting in which they discuss the future of the economy with representatives from workers, firms and the government. They
It is 2023. Sweden has a meeting in which they discuss the future of the economy with representatives from workers, firms and the government. They are concerned about weak economic conditions in Sweden, the government negotiates with all of Sweden's major employers and unions in the country to reduce all nominal wages by 10%. If the Central Bank chooses to act in response to the change in prices, they would _____________ (buy/sell) securities from/to banks, which _____________ (raises/lowers) the interest rate. If they do so, the money demand curve_____________ (moves left/moves right/is unchanged) while the money supply curve _______________ (moves left/moves right/is unchanged). As a result of the central bank's action outlined above, aggregate ______________ (supply/demand) shifts______________(leftward/rightward) in the short run in response. Alternatively, the central bank could have ________________(raised/lowered) the RRR to achieve a similar effect. Had they convinced the government to use fiscal policy instead, they could have __________(raised/lowered) taxes
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