This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: However, because expected inflation also falls, there is an immediate downward jump in the price level . Analytical Problem 7.4: The key to this problem is to remember that: ) , , ( m e i r Y L M P π + = a.) A temporary increase in G makes r increase, and so prices rise . b.) A reduction in e causes prices to fall . c.) A temporary increase in labor supply makes Y increase temporarily, which also causes r to fall. L rises and so prices fall . d.) An increase in m i causes L to rise, and so prices fall . 2...
View Full Document
This note was uploaded on 07/17/2008 for the course ECON 508 taught by Professor Fleisher during the Winter '06 term at Ohio State.
- Winter '06