A) Suppose the economy is in full employment and that people start using cash less frequently in transactions due to the introduction of new digital currencies. Use the IS-LM and the aggregate demand-aggregate supply models to illustrate graphically the short-run and the long-run effects. Be sure to label the axes, the curves, and the equilibrium values before and after the change. B) Based on your answer in part A, state in words what happens to income, price level, real rate of interest, investment, and consumption in the short run and in the long run.

A) Suppose the economy is in full employment and that people start using cash less frequently in transactions due to the introduction of new digital currencies. Use the IS-LM and the aggregate demand-aggregate supply models to illustrate graphically the short-run and the long-run effects. Be sure to label the axes, the curves, and the equilibrium values before and after the change. B) Based on your answer in part A, state in words what happens to income, price level, real rate of interest, investment, and consumption in the short run and in the long run.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section16.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 3SQP

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