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An economy is initially in long-run equilibrium. The introduction of an electronic payments system dramatically reduces the demand for money in the economy.
a. What is the short-run impact on prices and output of the new system?
b. What can the central bank do, if anything, to counteract the short-run changes in output and prices?
c. If the central bank does not take any policy actions, what will be the long-run impact of the electronic payments system on prices and output?
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The nation of Potchatoonie produces hockey pucks, cases of root beer also back rubs.
Illustrate what amount of profit does the industry fail to pick up by refusing to increase output by one unit
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