An Economy Is Initially in Long-Run Equilibrium

question 13

Essay

An economy is initially in long-run equilibrium. The introduction of an electronic payments system dramatically reduces the demand for money in the economy.
a. What is the short-run impact on prices and output of the new system?
b. What can the central bank do, if anything, to counteract the short-run changes in output and prices?
c. If the central bank does not take any policy actions, what will be the long-run impact of the electronic payments system on prices and output?

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Definitions:

Restraining Forces

Restraining forces are factors that resist or work against change within an organization or system.

Resistance Change

Opposition or pushback against modifications in procedures, policies, or strategies, often due to discomfort with altering the status quo.

Minimizing Resistance

Refers to strategies and efforts made to reduce opposition or reluctance towards change within an organization or individual.

Coaching

A developmental process where an individual, usually more experienced, supports and guides another individual to achieve specific personal or professional goals.