You have data for real output y, price level P, and the nominal wage Wat two distant dates (time t= O and time t= 10) for three different economies: United Kin dam France Price level All these observations reflect potential equilibrium levels: each of the three economies was in a first potential equilibrium at time t: 0 and and is in a new potential equilibrium at time t: 10. You do not have any short-run data. Use any suitable model studied in Topic 1 (Lecture Notes, Chapter 1) to interpret the data and answer all the following questions: (3.c) Between time t = 0 and time t = 10, one of the three economies experienced a scal contraction and a monetary expansion. Can you identify this economy? Motivate your answer and try to speculate on plausible reasons for this combination of scal and monetary interventions. |