1. An economy is in a long-run macroeconomic equilibrium with an unemployment rate of 5% when the government passes a la

[answerhappygod]

1. An economy is in a long-run macroeconomic equilibrium with an
unemployment rate of
5% when the government passes a law requiring the central bank to
use monetary
policy to lower the unemployment rate to 3% and keep it there. How
could the central
bank achieve this in the short run? What would happen in the long
run?
2. The government’s budget surplus in Macroland has risen
consistently over the past five
years. Two government policy makers disagree as to why this has
happened. One argues
that a rising budget surplus indicates a growing economy; the other
argues that it shows
that the government is using contractionary fiscal policy. Which
policymaker do you
believe is correct, and why?
3. You are the economic minister of Bukanaland. The economy is in
long-run equilibrium
when each of the following aggregate demand shocks occurs. What
kind of gap—
inflationary or contractionary --- will the economy face after the
shock, and what type of
fiscal policy would help move the economy back to potential
output?
a. A stock market boom increases the value of stocks held by
households.
b. Firms now believe that a recession in the near future is
possible.
c. The quantity of money in the economy declines and interest rates
increase.