Explain what the monetary authority can do to help

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Reference no: EM133487331

Suppose that an economy is overheating as it is producing more than its sustainable amount of output.

Question 1: Use the AS-AD model to demonstrate the situation.

Question 2: Explain what the fiscal authority can do to bring output back to the full-employment level. Use the Keynesian Cross, IS-LM, and AS-AD models to explain your work in words and in figures. Assuming that prices are perfectly sticky in the short-run, discuss the implications of policy in the short-run and in the long-run.

Question 3: Explain what the monetary authority can do to help bring output back to the full-employment level. Use the Keynesian Cross, IS-LM, and AS-AD models to explain your work in words and in figures. Assuming that prices are perfectly sticky in the short-run, discuss the implications of policy in the short-run and in the long-run.

Reference no: EM133487331

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