This question has been answered
Question

Question 11 (20 points) Answer the following questions using the IS-LM

model and support your explanation by ONE diagram for all parts. Also, compare your answer to initial equilibrium. Each part is worth 5 points. Suppose a closed economy experiences a fall in money demand. a) What happens to the economy's output, price, real money balance and unemployment rate in the short run? Explain. b) In the absence of intervention from policy makers, what happens to the economy's output, price, the real money balance and unemployment rate in the long run? Explain. c) Suppose the government finds the change in output in part (a) undesirable and wants to keep output from changing, what kind of policy should the government pursue? What happens to the real money balance? d) Suppose the central bank finds the change in output in part (a) undesirable and wants to keep output constant, what kind of policy should the central bank pursue? What happens to the real money balance?

Answered by Expert Tutors
Step-by-step explanation
1 Attachment
IS'-LM'.PNG
PNG
Question 11 (20 points) Answer the following questions using the IS-LM model and support your explanation by ONE diagram for all parts. Also, compare...
Get unstuck

365,875 students got unstuck by Course
Hero in the last week

step by step solutions

Our Expert Tutors provide step by step solutions to help you excel in your courses