Answer to Question #38021 in Macroeconomics for raju

Question #38021
How might monetary policy destabilize the economy?
1
Expert's answer
2013-12-25T10:50:39-0500
The Short Run Aggregate Supply curve (SRAS1) is shifting rightward in coordinates of the Real GDP and Price Level (ridding the economy of its recessionary gap), but Fed officials do not realize this is happening. They implement expansionary monetary policy, and the Aggregate Demand curve (AD) ends up intersecting SRAS at point 2 instead of intersecting SRAS1 at point 1. Fed officials end up moving the economy into an inflationary gap and thus destabilizing the economy.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS
paypal