Economics: The Basics 1st Edition by Mike Mandel

تمرين 4

Suppose that the Federal Reserve cuts the fed funds rate.
a) Does the cut in rates cause a shift in the aggregate supply curve or aggregate demand curve?
b) Draw an aggregate supply-aggregate demand diagram to illustrate the impact of the interest rate cut. Label the original aggregate equilibrium and the final aggregate equilibrium.
c) Does output rise or fall in the short run? Does output rise or fall in the long run?