Consider a closed economy that begins with her long run equilibrium. Recently, households become more pessimistic. They tend to save more to get prepared. Adopt the sticky-wage model of the short run aggregate supply to explain the short run effects of this shock. Also, explain the gradual long run adjustments over time using the sticky-wage model of the short run aggregate supply. Assume the policymakers do not accommodate the shock.
Consider a closed economy that begins with her long run equilibrium. Recently, households become more pessimistic. They tend to save more to get prepared. Adopt the sticky-wage model of the short run aggregate supply to explain the short run effects of this shock. Also, explain the gradual long run adjustments over time using the sticky-wage model of the short run aggregate supply. Assume the policymakers do not accommodate the shock.
Chapter20: Monetary Policy
Section20.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model
Problem 3SQP
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Consider a closed economy that begins with her long run equilibrium.
Recently, households become more pessimistic. They tend to save more to get
prepared.
Adopt the sticky-wage model of the short run
short run effects of this shock. Also, explain the gradual long run adjustments
over time using the sticky-wage model of the short run aggregate supply.
Assume the policymakers do not accommodate the shock.
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