Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: Explain the effectiveness of the monetary policy, if people do not believe that the central bank will honour its promise to bring the economy back to the pre-pandemic level. In this case, is the sacrifice ratio expected to be larger or smaller?

Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: Explain the effectiveness of the monetary policy, if people do not believe that the central bank will honour its promise to bring the economy back to the pre-pandemic level. In this case, is the sacrifice ratio expected to be larger or smaller?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter14: Money And The Economy

Section14.1: Money And The Price Level

Problem 3ST

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Using the AD-AS model, draw a graph and explain the effect of the implementation of a restrictive monetary policy on the equilibrium price level and the equilibrium level of output.
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Aggregate Supply, Aggregate Demand, and Long-Run Equilibrium Please list one event that impacts AD (i.e. cause AD to shift to either left or right). Please list one event that impacts the position of short-run AS. Please talk about how a contractionary monetary policy shifts the AD curve. How do the price level and the real GDP change correspondingly? Please discuss why we believe that monetary policy is more effective in an open economy than fiscal policy? Please talk about what type of policies (i.e. expansionary and contractionary) should be used in the current recession caused by the pandemic. Why?
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