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Author Question: Show the effects of a permanent increase in the money supply. What will be an ideal ... (Read 101 times)

Chloeellawright

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on: Jun 30, 2018
Show the effects of a permanent increase in the money supply.
 
  What will be an ideal response?

Question 2

The Smoot-Hawley Tariff Act of 1930 has generally been associated with
 
  A) falling tariffs.
  B) free trade.
  C) intensifying the worldwide depression.
  D) recovery from the worldwide depression.
  E) non-tariff barriers.


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shayla

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Reply #1 on: Jun 30, 2018
Answer to Question 1

(1 ) AA-shifts right-increase in Y and E both higher than if money supply change was temporary rising price level makes AD decrease, DD shifts left
(2 ) rising prices also reduce real money supply, so AA shifts left (although not all the way back to original position)
(3 ) AA and DD reach short run equilibrium at an E that is higher than initially, but lower than the short run effects of the shift.
(4 ) Output returns to initial level because higher prices reversed the effect of the initial depreciation on Aggregate Demand.

Answer to Question 2

C


Chloeellawright

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Reply 2 on: Jun 30, 2018
YES! Correct, THANKS for helping me on my review

lkanara2

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Reply 3 on: Yesterday
Excellent

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