ex Question 7 Short essay(3/4 of a page) Assuming an economy is currently at its natural...

ex Question 7

Short essay(3/4 of a page)
Assuming an economy is currently at its natural output level (full employment). Using a set of appropriately related IS-LM and AD-AS graphs, explain the impact of a monetary expansion (expansionary monetary policy) on price level, interest rate and output level in both short-run and medium run.

Solutions

Expert Solution

Short Answer :

Due to the monetary expansion in the economy, The LM curve shifts to the Right there by decreasing interest rate and increasing income.

In the AS-AD model, the AD curve shifts tobthe right due to increasing purchasing power cause of monetary expansion. There by increasing the price level and the output in the economy.

Moving towards the Long Run -

The economy wants to return back to natural rate of output, thus the AD curve shifts left till economy achieves Natural rate of output and in this process the prices rise up and output is at natural rate.

Due to rise in price level, the money supply falls down and the interest rate shoots up.

Long Answer Ahead :

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

ex Question 2 Short essay(3/4 of a page) What are the three key macroeconomic goals (real...

ex Question 2 Short essay(3/4 of a page) What are the three key macroeconomic goals (real GDP, unemployment & inflation rate) that is of utmost concern to macroeconomists and why are they important. What can possibly happen to an economy if these variables are not closely monitored?

choose an environmental topic of your choice and write a short 4-5 page essay on that...

choose an environmental topic of your choice and write a short 4-5 page essay on that topic. Paper should include a title and: I. Introduction to the topic. 2. Key points, including impact on the environment. 3. A conclusion, that includes your view/opinion on the topic. 4. References; include at least one journal/paper/book.

Short Term Goals Paper 2 page minimum Essay discussing 3 short term goals you have.

If the economy starts at the natural rate of output, then in the short run a...

If the economy starts at the natural rate of output, then in the short run a decrease in aggregate demand moves the economy to a lower level of output and, according to the Phillips curve, a higher level of unemployment as the inflation rate falls. Select one: True False In the long run, unemployment depends upon factors such as the nature of the job search process, the amount and duration of unemployment benefits and the power of unions and minimum...

3-4 page essay on Enron Corporation, and how the scandal started and what was the end...

3-4 page essay on Enron Corporation, and how the scandal started and what was the end result of the scandal becoming public. As well as how did the Enron scandal affect corporations now.

Write a 7 page essay on helicopter parenting and work cited

In a 3-4 page essay please discuss the following, taking care to cite your readings and...

In a 3-4 page essay please discuss the following, taking care to cite your readings and research: 1. Describe the ways that the public sector and the private sector are different and how public sector and private sector management are alike. 2. Describe the difference between public goods and private goods, using some examples and examples of externalities. Why do governments provide public goods? Does the private sector ever get involved in the provision of public goods? Provide an example...

You will write one short essay for one of the question below. Each short essay should...

You will write one short essay for one of the question below. Each short essay should consist of approximately 3 paragraphs. A paragraph should include 4-5 sentences. You will be expected to write full words and full sentences. Your responses should be clear, detailed, and specific. 3. Please identify three examples of political action and social reform efforts directed by women during the late nineteenth and early twentieth centuries (1865 – 1910). You should discuss specific movements and/or organizations, their...

In a short (about half a page for each) essay, give an example that demonstrates the...

In a short (about half a page for each) essay, give an example that demonstrates the economic impact of drug use and abuse in the USA from each of the following perspectives: (a) legal/moral (b) medical/health (c) psychosocial or sociocultural

write a short essay on cubas abundance of natural resources such as land, labour, capital or...

write a short essay on cubas abundance of natural resources such as land, labour, capital or energy resources?

Subjects