(Solved): 1. A lower reserve ratio or reserve requirement set by the Central Bank can increase the money supp ...

1. A lower reserve ratio or reserve requirement set by the Central Bank can increase the money supply in the economy. Explain it using a numerical example. 2. Discuss four factors that can shift the Aggregate demand curve (AD) to the right. 3. Explain how expansionary fiscal policy can close a recessionary gap using an appropriate diagram. Note: Use the following terms. They are: Long-run aggregate supply curve (LRAS), short-run aggregate supply curve (SRAS), Aggregate demand (AD), Real GDP, price level, potential GDP, etc. 4. Why is the long-run aggregate supply (LRAS) curve vertical? Explain it using an appropriate diagram.