Give details the effect of the shocks on the nominal interest rate
Explain the effect of the shocks on the long run with the help of an AD-AS graph
Suppose which deterioration in the education level of the U.S. population reduces the marginal product of labour. Also suppose which at the same time there is a rise in transfer payments (for example, for Social Security and Medicare) by the government.
With the help of a money-demand, money-supply graph, explain the effect of these shocks on the nominal interest rate, i.
With the help of an AD-AS graph, explain the effect of these shocks on the long-run equilibrium level of the price level and output. Use a long-run supply curve to answer this question.