MACROECONOMICS UNIT 5 MACROECONOMICS Long-Run Consequences URP Ultimate ReviewPacket.com BIG PICTURE IDEAS #1. Policymakers often combine policy and policy to influence the economy. #2. The short-run curve shows a trade-off between and unemployment. #3. Expansionary monetary policy can stimulate the economy in the short run but, according to the theory of mone, it will lead to higher in the long run. #4. An increase in deficit spending increases the national and often results in an increase in the real interest rate and less investment, or out. #5. More physical or human capital causes economic growth and shifts the long-run aggregate supply curve to the Topic 5.1- Fiscal and Monetary Policy in the Short Run 1. Identify if each will 1 , J , or not change in the short run: True or False Aggregate Aggregate 2. Open market operations are an example of fiscal policy. Policy Demand Supply 3. Expansionary monetary policy can cause inflation in the long run, b Contractionary monetary policy expansionary fiscal policy cannot. No policy with negative output gap 4. Elected politicians are more reluctant to implement contractionar Expansionary fiscal policy policies than policymakers at the central bank. Expansionary monetary policy 5. Expansionary monetary policy will cause a decrease in nominal it Contractionary fiscal policy rates and a decrease in employment. No policy with positive output gap 6. Fiscal policy is implemented by the central bank. Topic 5.2- The Phillips Curve 7. On the graph to the right, draw the Price LRAS short-run and long-run Phillips curve Level SRAS and label points A, B, and C based on the changes in aggregate demand and PL3 - supply. PL2- B PL1 - AD2