You Are the Governor of the Central Bank of Atlantis

question 19

Essay

You are the governor of the Central Bank of Atlantis.You believe in a Keynesian model of the economy,and your goal is to keep the economy at the full-employment level of output.How would you respond (tightening or easing policy)in each of the following cases?
a.Government purchases increase.
b.Corporate tax rates increase.
c.Expected inflation increases.
d.There's a beneficial oil price shock (and the LM curve shifts more to the right than the FE line).

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Definitions:

Dr. Pepper

A brand of carbonated soft drink created in the United States and well-known for its unique flavor.

Law Of Demand

The negative relationship between price and quantity demanded: Ceteris paribus, as price rises, quantity demanded decreases; as price falls, quantity demanded increases.

Prices Fall

A scenario in which the market prices of goods or services decrease, often due to increased supply or reduced demand.

Law Of Demand

The economic principle stating that, all else being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.