# 3. Assume that country J is in a situation of short and medium run equilibrium. Assume...

###### Question:

3. Assume that country J is in a situation of short and medium run equilibrium. Assume that the government of J wants to foster output without increasing public expenditures. i. Which policy should the govern ment adopt? [2p] ii. Explain the short-run effects of this policy on interest rate, investments and money supply. [4p] iii. Explain the medium-run effects of the policy on the price level and on the real money supply.[3p] iv. What happens to the nominal exchange rate of the national currency? [2p] a. C

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