Show the effects of a permanent increase in the money supply
What will be an ideal response?
(1 ) AA-shifts right-increase in Y and E both higher than if money supply change was temporary rising price level makes AD decrease, DD shifts left
(2 ) rising prices also reduce real money supply, so AA shifts left (although not all the way back to original position)
(3 ) AA and DD reach short run equilibrium at an E that is higher than initially, but lower than the short run effects of the shift.
(4 ) Output returns to initial level because higher prices reversed the effect of the initial depreciation on Aggregate Demand.
You might also like to view...
Given the information in the figure above, Liz has a comparative advantage in ________ and an absolute advantage in ________
A) smoothies only; both goods B) smoothies only; smoothies only C) both goods; both goods D) salads only; both goods E) salads only; salads only
In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve shifts ________ because ________
A) aggregate supply; leftward; the money wage rate rises B) aggregate supply; rightward; the money wage rate falls C) aggregate demand; rightward; the money wage rate falls D) aggregate demand; leftward; the money wage rate rises E) potential GDP; leftward; the money wage rate falls
External economies of scale will ________ average cost when output is ________ by ________
A) reduce; increased; the industry B) reduce; increased; a firm C) increase; increased; a firm D) increase; increased; the industry E) reduce; reduce; the industry
Why is it that a firm will typically not pay for general training?
A. The skills gained from the general training are transferable to other firms. B. General training is expensive. C. The benefits of general training depreciate quickly. D. General training does not increase worker productivity. E. General training is free.