Explain the effects of expansionary monetary policy

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Unformatted text preview: M/P. Explain the effects of expansionary monetary policy using your results to illustrate. 3. Problem 3, Chapter 5 of Blanchard, p. 106. 4. Use the model of Problem 3 to answer this question. (a) Use your expression for equilibrium output to show how the effect of an increase in G on output depends on the parameter d2 (b) An increase in the ratio d2/d1 means that money demand is more sensitive to the interest rate. Use this interpretation to explain the result you found in part (a). Also use an IS-LM diagram to illustrate your ans...
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This note was uploaded on 02/08/2011 for the course ECON 100B taught by Professor Yisun during the Spring '07 term at UCSC.

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