the economy is currently at the Natural Level of real GDP
the economy is currently at the Natural Level of real GDP. Suppose
the Fed chooses to decrease the money supply by selling bonds to the public; what effect this will have in the short run (SR)
1. Describe the initial situation: { Is GDP high or low? Is Ue high or low?}
2. If the Fed decreases the money supply, show the change on the graph (what line shifts and why?) and explain the process of how the changes come about.
3. What happens to P, GDP, UE? What increases and what decreases?
Since these changes occurred, what will happen in the long run (LR)?
1. Describe the new initial situation: {Is GDP high or low? Is Ue high or low?}
2. What happens as a result of self regulation, show the change on the graph (what shifts and why?) and explain how the changes come about.
3. What happens to Price ,GDP, unemployment ? What increases and what decreases?
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