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Describe the Effects of Contractionary Monetary Policy by the Domestic

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Essay

Describe the effects of contractionary monetary policy by the domestic central bank on output,the real interest rate,and net exports in both the domestic and foreign country,using a Keynesian model in the short run.What happens in the long run? Show a diagram to illustrate the short-run and long-run effects in both countries.


Definitions:

Par Common Stock

Common stock issued with a nominal or face value, used primarily for accounting purposes and often set at a low amount.

Treasury Stock

Stocks that the issuing company originally sold and then bought back, lowering the total number of shares available for trade on the market.

Fair Market

The price that an asset would sell for on the open market, under all conditions requisite to a fair sale.

Stock Dividend

A form of dividend payment made by a company to its shareholders in the form of additional shares rather than cash.

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