An exogenous decrease in the velocity of money
Course:- Microeconomics
Reference No.:- EM13700170

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Let’s examine how the goals of the central bank influence its response to shocks. Suppose the European Central Bank (the ECB) cares only about keeping the price level stable and the US central bank (the Fed) cares only about keeping output at its natural level. Explain how each central bank will respond to the following (a) An exogenous decrease in the velocity of money. (b) An exogenous increase in the price of oil.

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