Problem set 5

May 12th, 2015
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ECON 214PROBLEM SET 51. What impact will an unanticipated increase in the money supply have on the real interestrate, real output, and employment in the short run? How will expansionary monetarypolicy affect these factors in the long run? Explain.An unanticipated increase in the money supply will cause a lower interest rate due to anincrease in loanable funds. Real output would be increased due to lower interest rates.When real output is increased, there is a higher demand for labor to raise the output levelwhich would cause higher employment rates. Eventually, in the long run, inflat

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