Analyze the following statement, and show what would happen in the long run if such advice were

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Analyze the following statement, and show what would happen in the long run if such advice were followed by the Fed: "The increase in the stock market has increased people's wealth. As a result, their consumption has increased, increasing aggregate demand and output. So the Fed needs to increase the money supply, since with higher income, people's demand for real money balances will be higher."

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Macroeconomics

ISBN: 9780134167398

9th Edition

Authors: Andrew B. Abel, Ben Bernanke, Dean Croushore

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