Question
When making monetary policy changes decision makers are concerned with the macroeconomic goals of maintaining stable prices, full employment, and an economic growth rate that
When making monetary policy changes decision makers are concerned with the macroeconomic goals of maintaining stable prices, full employment, and an economic growth rate that is sustainable. Two measurements are used to analyze the impacts on these goals: aggregate demand (AD) and aggregate supply (AS). An AD curve is used to show how combinations of price level and income can result in a simultaneous equilibrium in real goods and money markets. An AS curve demonstrates the price level at which companies are willing to produce goods and services. Explain how changes in monetary policies can affect one or both of these measurements (AD and AS).
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