SIMON FRASER ECON291 tut6 (1)

SIMON FRASER ECON291 tut6 (1) - employment the real wage...

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Economics 291: Canadian Macroeconomic Policy Tutorial #6 (week of Oct 19) 1. Define general equilibrium in the IS-LM diagram. If the economy is not in general equilibrium, what determines output and the real interest rate? What economic forces act to bring the economy back to general equilibrium? 2. Use the IS-LM model to analyze the general equilibrium effects of a permanent increase in the price of oil (a permanent adverse supply shock) on current output,
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Unformatted text preview: employment, the real wage, national savings, consumption, investment, the real interest rate, and the price level. 3. Can monetary policy be used to offset the real interest rate effects of a decline in desired investment, if prices adjust quickly to restore general equilibrium? Explain. 4. Describe the effects, in both the very short run and the long run, of a decline in the money supply. Explain what happens to real output and the price level....
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