One of the business cycle factsis that “the nominal money supply is a pro-cyclical and leading variable”. Traditional Keynesian theory explains this fact with the transmission mechanism of money. The New Classical approach uses misperceptions theory explanation. The RBC theorist try to explain the relationship with reverse causation theory. b. According to the “misperceptions theory of business cycles”, how and why an increase in nominal money supply causes an increase in real output in the short run by affecting the behavior of producers? Does your answer change if the monetary shock is anticipated or unanticipated? Explain by using the IS-LM-FE and AD-AS Frameworks
One of the business cycle factsis that “the nominal money supply is a pro-cyclical and leading variable”. Traditional Keynesian theory explains this fact with the transmission mechanism of money. The New Classical approach uses misperceptions theory explanation. The RBC theorist try to explain the relationship with reverse causation theory. b. According to the “misperceptions theory of business cycles”, how and why an increase in nominal money supply causes an increase in real output in the short run by affecting the behavior of producers? Does your answer change if the monetary shock is anticipated or unanticipated? Explain by using the IS-LM-FE and AD-AS Frameworks
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter25: The Keynesian Perspective
Section: Chapter Questions
Problem 2SCQ: In a Keynesian framework, using an AD/AS diagram, which of the following government policy choices...
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One of the business cycle factsis that “the nominal money supply is a pro-cyclical and leading variable”. Traditional Keynesian theory explains this fact with the transmission mechanism of money. The New Classical approach uses misperceptions theory explanation. The RBC theorist try to explain the relationship with reverse causation theory.
b. According to the “misperceptions theory of business cycles”, how and why an increase in nominal money supply causes an increase in real output in the short run by affecting the behavior of producers? Does your answer change if the monetary shock is anticipated or unanticipated? Explain by using the IS-LM-FE and AD-AS Frameworks.
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