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4.For each of the following what kind of monetary policy do you suggest? What happens to...

4.For each of the following what kind of monetary policy do you suggest? What happens to output, unemployment and inflation in short run and long run if the monetary policy that you suggest has been taken?

a. Government decides to take policy to reduce deficit.

b. Construction workers goes on a strike for 2 months.

c. US dollar depreciates with respect to euro

d. People become more optimistic about the economy

e. Productivity of U. S workers increase due to technological advancement

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Answer #1

E. Monetary policy - expansionary, in order to upgrade technology

Output-increase in both short and long run

Unemployment - increase as less labour could do the work of many

Inflation - decrease in short run due to increment in productivity.

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