In the RBC model, assume we start from a point of long run equilibrium, then the effect of the natural disaster in 11 ripples through the macro economy and the central bank decides to increase the money supply. Which of the following are true? (choose all that apply). A) Long run growth will return to pre-disaster levels once the money supply increase takes place. B) Inflation rates will continue to fall C)Inflation rates will continue to rise D)Inflation rates will be higher than if the central bank did nothing in response to the shock. E)The central bank cannot increase money supply after disaster occurs.

In the RBC model, assume we start from a point of long run equilibrium, then the effect of the natural disaster in 11 ripples through the macro economy and the central bank decides to increase the money supply. Which of the following are true? (choose all that apply). A) Long run growth will return to pre-disaster levels once the money supply increase takes place. B) Inflation rates will continue to fall C)Inflation rates will continue to rise D)Inflation rates will be higher than if the central bank did nothing in response to the shock. E)The central bank cannot increase money supply after disaster occurs.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 5SQP

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