Presume a closed economy. The economy is at full employment in the short run. The central bank conducts open market operations by buying long-term government securities. Discuss the economic impact of the above policy in the short-run and long-run on prices, output, and investment. Your explanation should be in terms of either movement along the curve (upward/downward/left/right) or shift (right/left) of the curve. Presume Keynesian supply curve (or Short Run Aggregate Supply Curve, SRAS) for the short run and long-run Aggregate Supply (LRAS) curve for the long run.

a.Short Run(5)

Outcome (increase/decrease/no-change)

Prices

Output

Investment

Explain (Discuss all 4 curves (IS, LM, AS, and AD)

1. Long Run(10)

Outcome (increase/decrease/no-change)

Prices

Output

Investment

Explain (Discuss all 4 curves (IS, LM, AS, and AD))