Suppose the central bank implements a monetary contraction in the current period and is expected to continue this monetary contraction in the future. Use the IS-LM model to illustrate graphically and explain the effects of this policy on current output and the current interest rate
What will be an ideal response?
In the current period, the LM curve will shift up causing r to rise and Y to fall. The expectation that this will continue will cause individuals to expect higher future rates and lower future output. The higher future rates will decrease current C and current I. The lower future Y will do the same. So, we will also see a leftward shift in the current IS curve. This will tend to decrease the current r and current Y as well.
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In a representative democracy, there are
A. elected politicians. B. public employees. C. special interests. D. all of these answer options are correct.
Of the stimulus package proposed by the Bush Administration in 2008,
A. the tax rebates were adopted while, the extension of temporary tax cuts was rejected. B. none of the proposed components of the package were actually implemented. C. all of the proposed components of the package were quickly implemented. D. the tax rebates were rejected while, the extension of temporary tax cuts was adopted.