Suppose that COVID pandemic-related travel restrictions raised the cost of production in many firms. Suppose also that the military conflict in Europe significantly increased the demand for military goods from most countries worldwide. State and explain how the quantity of GDP, employment, and the general price level in a country affected by both travel restrictions and military conflict change according to each of the following two models of the closed economy: i. The monetarist's model. ii. The complete Keynesian model. You must provide ONE explanation for part (i and a separate explanation for part (ii) (b) Describe how a policy shock from increased OCR propagates through different markets to generate corresponding changes in the real and nominal exchange rates in the short run and in the long run.

Q&A Education