Comment on what would occur to government multiplier under

Reference no: EM13396673

Suppose, that instead of holding prices fixed as we did in this problem, that prices were perfectly flexible, as in a classical world. Discuss, do not show, how your graphs would be different. Also, comment on what would happen to the government multiplier under the assumption of perfectly flexible prices

Initial Conditions

rr/D = .10

C = 900 b

D = 1800 b

ER = 0

M = C + D

Given the above information (show all work on your exam sheet):

i) Calculate the MB.

ii) Calculate the money multiplier (mm).

iii) What is the money supply (use MS = mm x MB)?

Reference no: EM13396673

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