Essay
Suppose the Federal Reserve's short-run response to any change in the economy is to change the money supply to maintain the existing real interest rate.What would happen to money supply if there were a reduction in government purchases? Given the Fed's policy,what would happen in the very short run (before general equilibrium is restored)to output and the real interest rate? What must happen to the LM curve and the price level to restore general equilibrium?
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The decrease in G shifts the IS curve do...View Answer
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Q1: In classical IS-LM analysis,the effects of a
Q2: A temporary decline in productivity would cause
Q3: A decrease in the money supply would
Q4: You have just read that Australia has
Q5: An increase in the money supply would
Q7: The IS curve would unambiguously shift up
Q8: An increase in taxes (when Ricardian equivalence
Q9: A decline in expected future output would
Q10: The FE line shows the level of
Q11: The Fed has announced that it plans