EC140 Lecture Notes - Lecture 16: Output Gap, Canadian Dollar, Monetary Policy
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There is a large reduction in price of oil which is both an input to production and a key output in the canadian economy. In the short run, what effect will this have on real gdp and the price level. Uncertain effect on gdp, decrease the price level. Key input = reduction in price of inputs. In the long run, what effect will this have on real gdp and the price level. Economy adjusts as shifts right = lower prices. The canadian economy starts in long run equilibrium. There is a large reduction in price of oil which is both an input an input to production and a key output in the canadian economy, which leads to a reduction in the price level and in real gdp. Monetary policy is not about government policy. Must shift ad curve to the right. Ae: a = c + i + g + x, change in autonomous exp.
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