(Answered) 1 put yourself in the shoes of an economic policy

Management Studies

1. Put yourself in the shoes of an economic policy maker. The economy is in equilibrium with Price=100 and Q=3000. You refuse to "accommodate" inflation, that is, you want to keep prices absolutely stable at P=100, no matter what happens to output. You can use monetary and fiscal policies to affect aggregate demand, but you can not affect aggregate supply in the short run. How would you respond to :

a. A surprise increase in investment spending

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