e Mindlop Modern Macroeconomics and Monetary Policy: Aplia Homework Attempts: 6.

Question

e Mindlop Modern Macroeconomics and Monetary Policy: Aplia Homework Attempts: 6. Monetary policy in the long run Consider a hypothetical economy that produces at its long-run macroeconomic equilibrium at a price level of 100. Suppose the real GDP of this economy grows at an annual rate of 5%. Assume that the central bank would like to keep the inflation rate at 2% per Average: /6 year. If the velocity of money remains constant, the central bank can achieve its goal by pursing an annual money growth rate of Suppose the central bank enacts an unanticipated expansionary monetary policy. As a result, the supply of loanable funds , leading to money balances, in short-term interest rates. This in turn the opportunity cost of holding money. As people hold- . the will True or False: The shift in monetary policy exerts an impact on output and the general level of prices with a time lag. True False The following graph shows the goods and services market of this economy at full employment. Assume that potential output remains constant. Adjust the graph to show the long-run effect of an unanticipated expansionary monetary policy on the goods and services market by dragging the aggregate demand (AD) curve, the short-run aggregate supply (AS) curve, or both.

Explanation / Answer

SUPPLY OF LOANABLE FUNDS WOULD INCREASE
LEADING TO A DECREASE
INCREASES THE OPPPRTUNITY COST
LESS MONEY BALANCES
NEED OPTIONS TO CHOOSE FROM

TRUE

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