Question

Assume that a country's economy run equilibrium and the actual unemployment lower than the natural rate of unemployment

A)This economy is in what state

1 Where is the current output level, in relation to full employment

2 is thete inflation in this economy Why or Why not

B)What open-market operation can the country's central bank use to move the economy toward its long-run equilibrium

C)As a result of that action above what happens to the Money Supply and equilibrium nominal interest rate in the short run

D)Based on the interest rate change from above, will each of the following increase, decrease, remain the same the short?

1 Real output. Explain.

2 The natural rate of unemployment

E)Assume instead that the central bank does not pursue the monetary policy action from part (b) and there was no other government decrease, or remain the same in the long run

1 Short-run aggregate supply. Explain.

2. Employment

F)What fiscal policy action could the Government take to correct this problem

1 result of this action what will happen the loanable funds market

2 With the change in the real interest rate from above what happened to investment

Answer 1