The diagram shows an economy’s long-run aggregate supply (LRAS), short-run aggregate supply (SRAS), and aggregate demand (AD). Assume the country’s economy is currently at short-run equilibrium and that the banking system has ample reserves. Which of the following is a monetary policy action the country’s central bank can use to restore full employment, and what is the consequent effect on the value of the country’s currency in foreign exchange markets?ResponsesA decrease in the money supply, which will cause currency depreciation.A decrease in the money supply, which will cause currency depreciation.A decrease in the discount rate, which will cause currency appreciation.A decrease in the discount rate, which will cause currency appreciation.An increase in the required reserve ratio, which will cause currency appreciation.An increase in the required reserve ratio, which will cause currency appreciation.An increase in interest on reserves, which will cause currency appreciation.An increase in interest on reserves, which will cause currency appreciation.A decrease in administered interest rates, which will cause currency depreciation.

In a small open economy with a fixed exchange rate, if the central bank decreases the money supply, then in the new short-run equilibrium：A.The exchange rate risesB.income risesC.income fallsD.income remain constant

The economy is initially at its long-run equilibrium. A diplomatic dispute with its trading partner countries now leads to a decline in its exports. In the short run, the aggregate demand curve shifts left. In the long run, the price level decreases, the output returns to its potential, and real wages decrease. In the short run, the aggregate demand curve shifts right. In the long run, the price level increases, the output returns to its potential, and real wages do not change. In the short run, the aggregate demand curve shifts right. In the long run, the price level increases, the output returns to its potential, and real wages increase. In the short run, the aggregate demand curve shifts right. In the long run, the price level increases, the output returns to its potential, and real wages decrease. In the short run, the aggregate demand curve shifts left. In the long run, the price level decreases, the output returns to its potential, and real wages do not change.

In the AD-AS (Aggregate Demand-Aggregate Supply) model, what is the likely outcome if the central bank implements an expansionary monetary policy?A.The aggregate demand (AD) curve shifts to the right, leading to increased real GDP and potential inflation.B.The aggregate demand (AD) curve shifts to the right, resulting in increased real GDP, but the impact on inflation depends on the position of the short-run aggregate supply (SRAS) curve.C.The aggregate supply (AS) curve shifts to the right, causing increased real GDP and lower inflation.D.The short-run aggregate supply (SRAS) curve shifts to the right, causing a decrease in real GDP and potential deflation.SUBMIT ANSWER

In the AD-AS Model, if the central bank implements an expansionary monetary policy (such as lowering interest rates), which of the following options most accurately describes the short-term changes in the Aggregate Demand (AD) curve and the Short-Run Aggregate Supply (SRAS) curve?A.AD shifts to the right; SRAS remains unchanged.B.AD shifts to the left; SRAS shifts to the right.C.AD remains unchanged; SRAS shifts to the left.D.AD shifts to the right; SRAS shifts to the left.

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