Beginning from full-employment equilibrium, illustrate graphically how each of the following would impact the economy
a. the short-run impact of an unanticipated decrease in the money supply
b. the long-run impact of an unanticipated decrease in the money supply
a. This is shown by a decrease in aggregate demand, which causes a decrease in both prices and real output in the short run.
b. After the decrease in aggregate demand, the economy will be operating at a point below full employment, causing resource prices to fall and short-run aggregate supply to rise. The long-run impact will be a decrease in prices with no change in real output.
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According to your text, the "market economy" can best be understood as
A) an institution created by British merchants around the time of Smith's Wealth of Nations. B) an extremely complex institution that emerged out of individuals specializing and trading among each other. C) an institution unique to America. D) an institution that could not exist in the absence of regulation.
Monetary and fiscal policy measures won't help end a recession, according to the _________ school of thought.
Fill in the blank(s) with the appropriate word(s).
If an economy is operating at a point inside the production possibilities curve,
A. its resources are not being used efficiently. B. opportunity costs are decreasing as more of one good is traded for the other good. C. technology has improved. D. there is full employment of all resources.
The higher the opportunity cost of borrowing, the higher the amount of investment, other things constant.
a. true b. false