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Suppose the economy is currently in short run macroeconomic equilibrium, with actual GDP equal to potential GDP. (a)Depict this situation using AD-AS, being sure to
Suppose the economy is currently in short run macroeconomic equilibrium, with actual GDP equal to potential GDP.
- (a)Depict this situation using AD-AS, being sure to label all curves and axes. 2 points.
- (b)Suppose that, in the market for money (the liquidity preference model), consumers suddenly, because of their concerns about their future income and wealth, decide to greatly increase their demand for money, relative to other assets. What effect will this have in the AD-AS model? 2 points
- (c)What open market operation could the Federal Reserve carry out, to close this gap? Show graphically the effect it would have on AD or AS. 2 points.
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An Inquiry Into The Nature And Causes Of The Wealth Of Nations
Authors: Adam Smith, R H Campbell
1st Edition
0865970068, 9780865970069
