Question
Question 2 ( 35%) 1- In the monetary intertemporal model seen in class, explain and illustrate graphically how decreases in z and z' affect the
Question 2 ( 35%)
1- In the monetary intertemporal model seen in class, explain and illustrate graphically how decreases in z and z' affect the economy using output supply and demand, labour supply and demand and money supply and demand. (Assume that the direct effect of a decrease in z on the supply of goods is larger that the anticipated decrease in future TFP, z').
2- Explain the effects on real interest rate, wages, aggregate output, prices, employment, consumption, and investment
3- Suppose that the government decides to print money to finance a lump sum transfer of money to the representative consumer. Explain and illustrate graphically what would happen in the goods market, output market and money market as a result of this one-time printing of money.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started