Suppose there is a negative TFP shock caused by a coronavirus. a. In response to the pandemic, the Fed bought a large amount of U.S. Treasury bonds from the public. How does that affect the money supply, if at all? Explain. b. In the neoclassical model, would an increase in the money supply affect real output or employment? Explain.

Suppose there is a negative TFP shock caused by a coronavirus. a. In response to the pandemic, the Fed bought a large amount of U.S. Treasury bonds from the public. How does that affect the money supply, if at all? Explain. b. In the neoclassical model, would an increase in the money supply affect real output or employment? Explain.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 16P

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