When interest rate i is equal to zero and downward-sloping

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Suppose the money demand is ?at when the interest rate i is equal to zero and downward-sloping as usual when the interest rate i is greater than zero.

a. Draw the IS, LM and AD curves. Suppose that the economy starts from a short-run equilibrium where output is below the natural level of output.

b. If the central bank increases the money stock, what will be the e?ects on output and price level in the short run and the quasi-long run?

c. If the government raises G, what will be the e?ects on output and price level in the short run and the quasi-long run?

Reference no: EM131169444

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