Assume people and firms have rational expectations. Explain how each of the following events will affect aggregate

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Assume people and firms have rational expectations. Explain how each of the following events will affect aggregate output and the price level.

a. The Reserve Bank of India announces it will decrease the cash reserve ratio (CRR).

b. The government of India unexpectedly passes a bill that will reduce taxes.

c. The RBI announces a contraction in the money supply.

d. Without notice, OPEC increases oil production by 40 percent.

e. The government of India passes a previously unannounced bill, which causes an immediate increase in expenditure on food subsidy.

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Principles Of Macroeconomics

ISBN: 9781292303826

13th Global Edition

Authors: Karl E. Case,Ray C. Fair , Sharon E. Oster

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Question Posted: Dec 16, 2023 01:17 AM

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Assume people and firms have rational expectations. Explain how each of the following events will affect aggregate

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Effects of Events on Aggregate Output and Price Level in India a Decrease in Cash Reserve Ratio CRR Shortrun This increases the money supply as banks ...View the full answer

Principles Of Macroeconomics

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