ECON 214 Problem Set 6

Liberty ECON 214 Problem Set 6 Answers

  • Why is it possible to change real economic factors in the short run simply by printing and distributing more money?

 

  • Explain why a stable 5% inflation rate can be preferable to one that averages 4% but varies between 1–7% regularly.

 

  • Explain the difference between active and passive monetary policy.

 

  • Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the unemployment rate at 5%. Now assume that the central bank unexpectedly decreases the money supply by 6%.
    1. Illustrate the short run effects on the macro-economy by using the aggregate supply-aggregate demand model. Be sure to indicate the direction of change in Real GDP, the Price Level and the Unemployment Rate. Label all curves and axis for full credit.

 

  • Suppose the economy is in long-run equilibrium, with real GDP at $16 trillion and the unemployment rate at 5%. Now assume that the central bank increases the money supply by 6%.
    1. Illustrate the short-run effects on the macro-economy by using the aggregate supply-aggregate demand model. Be sure to indicate the direction of change in Real GDP, the Price Level, and the Unemployment Rate. Label all curves and axis for full credit.
$2.99
Buy Answer Key
  • Find by class