An insurance policy sells for $800. Based on past data, an average of 1 in 50
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Answer:
Through open market operations Government can fluctuate the money supply in the economy. One of the short-term effects is to drive the price level from 100 down to 93.3. In short run, decrease in money supply will leads to higher interest rate, this will discourage the investors. Thus, investing and spending will fall which will shift the aggregate demand curve leftward.
<em>check the attached file for the curve</em>
In long run adjustment in wages tale place and firm will pay lower wage rate to workers. Since nominal wages will decrease overtime causing the SRAS curve to shift rightward. Because unemployment is created in the short run which decreases wages, so supply increase from SRAS to SRAS (1). Long run equilibrium will attain at (8,87.5).
