In: Economics
a. (4 points) Discuss two ways in which the Central Bank can try to increase the money supply. Be explicit.
b. (6 points) What are the effects of the expansionary policy in the short run? Show in the appropriate graph(s).
c. (5 points) Which two factors determine the magnitude of the effects in the short-run?
d. (6 points) What are the effects in the long-run, assuming no further shocks to the economy? Show in the appropriate graphs.
e. (4 points) How does this example illustrate monetary neutrality? Explain your answer.