example of new chairman

example of new chairman - c. How dies this change in...

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The economy begins in long-run equilibrium. Then one day, the president appoints a new chairman of the Federal Reserve. This new chairman is well-known for his view that inflation is not a major problem for an economy. a. How would this news affect the price level that people would expect to prevail? b. How would this change in the expected price level affect the nominal wage that workers and firms agree to in their new labor contracts?
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Unformatted text preview: c. How dies this change in nominal wage affect the profitability of producing goods and services at any given price level? d. How does this change in profitability affect the SRAS curve? e. If AD is held constant, how does this shifting in the AS curve affect the price level and the quantity of output produced? f. Do you think this Fed chairman was a good appointment?...
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This note was uploaded on 04/26/2008 for the course ECN 115 taught by Professor Jia during the Summer '06 term at Northeastern.

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