Question

Starting at macroeconomic equilibrium at full employment, show the effect of completely expected expansionary monetary policy...

Starting at macroeconomic equilibrium at full employment, show the effect of completely expected expansionary monetary policy using an aggregate demand–aggregate supply (AD–AS) model and discuss.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Since here , the rise in the monetary expansion is fully expected by the workers , so here rational expectation would not allow the economy to operate above the full employment level. The workers would demand the higher wage and producers will not be able to increase the production level.

Therefore here expansionary monetary policy will shift the aggregate demand to right that is AD1 , but the supply will not rise, eventually economy will witness the inflationary pressure only.

Following is the diagram:

ہے مرررره LBAS مر 1, b

Add a comment
Know the answer?
Add Answer to:
Starting at macroeconomic equilibrium at full employment, show the effect of completely expected expansionary monetary policy...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT