Suppose the federal reserve adopts a tight money policy

Reference no: EM13692327

A) Suppose the Federal Reserve adopts a tight money policy to slow the economy down because of its concern about potentially rising inflation. Show this policy outcome graphically using the IS-LM model assuming people believe the new policy is temporary. State any assumptions you make.

B) Show this policy outcome graphically using the DD-AA model assuming people believe the new policy is permanent. State any assumptions you make.

C) Show this policy outcome graphically using the relative demand-relative supply model. State any assumptions you make.

D) Show this policy outcome graphically using the aggregate demand-aggregate supply model. State any assumptions you make.

E) Do all these models make the same predictions? Compare and contrast. Explain

Reference no: EM13692327

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