ECON 1110 Problem Set 11

ECON 1110 Problem Set 11 - What are the implications of the...

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ECON 1110 Intermediate Macroeconomics Spring 2011 Problem Set 11 1. Contrast monetarist and Keynesian views of the relationship between real output and aggregate demand in both the short-run and long-run. Contrast the conclusions that monetarists and Keynesians draw from this analysis of the aggregate demand-output relationship for the usefulness of active policies to stabilise output and employment. To what degree do differences in the theoretical analysis explain the different policy conclusions? 2. Explain the natural rate of employment and output theory.
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Unformatted text preview: What are the implications of the theory for the effectiveness of stabilisation policies? 3. Within the monetarist framework, would an expansionary fiscal policy action have short and long run policy effects similar to a monetary expansion? 4. Many central banks began following more restrictive monetary policies after the inflation problems of the 1970s. Using the Phillips curve, provide a monetarist analysis of the impacts of this policy shift on inflation and unemployment in the short-run and long-run....
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