Question 3

In the Classical Model, an increase in the money supply does not affect the level of output or employment. Explain.

Question 4

In the Keynesian model, what are the forces that cause an economy to settle at an equilibrium level of GDP that does not ensure full employment? (Hint: Explain why the amount of savings will exceed the amount of investment at the full employment level of GDP).

Question 5

In the Austrian framework, an expansion of the money supply by the central bank causes an unsustainable boom in the economy that is followed by a bust. Explain. (Make use of the Hayekian Triangle if you think it is necessary).