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forsome vogson P fixed Let's Be Critical/Sbfi:)t,rifal NM Vv = ?@ Y Can -F\V\C\"t:-\eb;om G recgss o m The assumption that output remains the same ... may not be true in the short-run. T m If output remains the same, why would there be fluctuations in unemployment? m *Quantity theory of money only holds in the long-run (if it holds) Principles of Macroeconomics 659
Short-run vs. Long-run—1 (Review: open market operations) m Suppose the economy isat*quilfi;flm, an decides to (L\VW"" reduce the money supply. m In order to reduce the money supply, the Fed uses open markeB operations to sell bonds to the public. Td Sl m By selling bonds, the Fed exchanges bonds for money from the bo v\AS public, thereby reducing the amount of money in circulation. 4 + other CeLuries. Principles of Macroeconomics 660
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