1) In the medium run monetary and fiscal policies are neutral. 2) An increase in the workers bargaining power leads to an increase in the équilibrium nominal wage however, the equilibrium real wage stays constant. 3) In terms of changing output, monetary policy is relatively more effective in the short run when the AS curve is relatively flat, while fiscal policy is more effective when the AS curve is relatively steep. 4) In medium run, output and price level always return to the same level. 5) Expansionary monetary policy has no effect on the level of output in the medium run.

1) In the medium run monetary and fiscal policies are neutral. 2) An increase in the workers bargaining power leads to an increase in the équilibrium nominal wage however, the equilibrium real wage stays constant. 3) In terms of changing output, monetary policy is relatively more effective in the short run when the AS curve is relatively flat, while fiscal policy is more effective when the AS curve is relatively steep. 4) In medium run, output and price level always return to the same level. 5) Expansionary monetary policy has no effect on the level of output in the medium run.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter20: Monetary Policy

Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 3SQP

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