according to an article entitled macroeconomic policy

according to an article entitled macroeconomic policy: objectives and instruments states that goal of macroeconomics is to capture efficiency and equity and looks at the different levels of aggregation. some key factors to watch for in macroeconomics is full employment price stability economic growth and equilibrium dutta 2016 p. 1 fiscal policy is what regulates most of government spending and the tax tariffs. however fiscal policy also affects consumption and other elements of investing. furthermore monetary policy is what banks use to operate how the money supply is ran in the economy. it is important to understand these key terms because they are essential in answering the following question when it comes to aggregate models and macroeconomic policies hall 2018 p. 1 the curves for the short run-aggregate supply do not have a slope that is upward which makes individual households want to spend more when they have an income that continues to rise. therefore we can assume that the price level and the amount of goods presented in the short-run instead of the long run. moreover the things that will make aggregate demand change is when there is a variation in interest rates and economical spending. the long run-aggregate supply can never shift is a false statement because the determining factors for it to shift is not influenced by the price levels. furthermore it is normal for it to shift to the left or the right depending on the services and goods farnham 2014 p. 398-399 the notion that a decrease in the money supply by the federal reserve or an increase in price levels will make a shift in the aggregate demand curve ad to the left is also a false statement. the monetary policies and the fiscal policies of the federal government are some of the contributing factors of making it change in a certain direction. however it is true that keynesian portion of aggregate supply sas curve would be helpful in a recessionary situation because it will illustrate the real true quality of gdp which is contributed the economy as a whole at different levels of costs farnham 2014 p. 367 it is not true that stagflation occurs when the ad curve shifts out on the upward sloping portion if sas curve. usually in stagflation there is a decrease in supply like inflation which make prices increase and makes the ad curve shift to the left. part 2 the statement about if the real money demand is greater than the real money supply interest rates must rise to reach equilibrium in the money market as institutions sell bonds to obtain more money is true. equilibrium is created when interest rates increase example 1 interest rates will rise when the amount of money demand over the capacity of the supply of money farnham 2014 p. 34-37 moreover the statement that the federal governments control of the money supply which influences interest rates is the primary tool that policys use to impact the macro economy is a false statement. fiscal policies and monetary policies plays a huge role in determining how things impact macro economies. example 2 example 1 example 2 furthermore that statement that a decrease in the reserve requirement decreases the money supply because banks have fewer reserves is also false. usually a reduction in money supply will happen when federal government increases their reserve prerequisites. the banks will have more money when this happens farrnham 2014 p. 380-383 see example 3 example 3 the statement that real money demand curve shows how households and businesses change their spending in response to changes in the interest rate is true. when interest rates continue to rise then the consumer demand for money tends to decrease at a certain rate. therefore the opposite happens when the interest rates decrease increase spending occurs farnham 2014 p. 102 the statement that an increase in the nominal money supply by the federal reserve and an increase in the price level will cause the real money supply curve to shift to the right is true. this tends to occur when there is an increase in the supply of money which makes interest rates high and makes the money demand supply equal.


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