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Lecture

Lecture 28.docx

5 Pages
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Department
Economics
Course Code
ECON 1BB3
Professor
Hannah Holmes

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Description
Lecture 28 Case 3:Aclosed economy begins in long run equilibrium.Aterrorist attack causes consumer spending to decline drastically. Show what happens in the short run and the long run, including the impact on output, the unemployment rate, and the price level. Describe how the economy moves from short run equilibrium to long run equilibrium (assuming that the government takes no action). Case 4:Aclosed economy beings in long run equilibrium.Aterrorist attack causes consumer spending to decline drastically. Show what happens in the short run, including the impact on output, the unemployment rate, and the price level. Now suppose that the government intervenes, using monetary policy. What type of policy should the central bank use (be as specific as possible)? Show the new equilibrium, after the policy has taken effect. What has happened to output, the unemployment rate, and the price level? What other type of
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