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Analyze the short-run (the price level is fixed) and the long-run (general equilibrium) effects of each of the following on the level of output, the real interest rate, and the price level. Illustrate your analysis graphically in two ways: (1) in an IS-LM-FE framework, and (2) in an aggregate demand-aggregate supple framework.

(a) The expected rate of inflation declines.

(b) Consumers increase their desired level of consumption at each level of income and the real interest rate.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M942501

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