Suppose the Bank of Canada reduces the money supply by 5 percent. a. What happens to the
Question:
a. What happens to the aggregate demand curve?
b. What happens to the level of output and the price level in the short run and in the long run?
c. According to Okun’s law, what happens to unemployment in the short run and in the long run?
d. What happens to the real interest rate in the short run and in the long run?
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a If the Fed reduces the money supply then the aggregate demand curve shifts down as in Figure 98 This result is based on the quantity equation MV PY which tells us that a decrease in money M leads to ...View the full answer
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Related Book For
Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
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