Homework Answers
E) real interest ratev = nominal interest rate- inflation
C) can alter the real interest rate in short run
sticky inflation remains unchanged, the increase in thenominal interest rate means that thereal interest rate rise otherwise decrease.
B) unemployment is zero
If the current output is equal to the full employment outputequilibrium or potential output ,then we say that the economy is in long-run equilibrium.
B) doesn't change
Recessionary level of inflation but constant low inflation.
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According to the Fisher equation, the real interest rate is given by a zero. b. the...
1) If an economy has a horizontal Phillips curve and experiences a recession, inflation: a. falls....
1) If an economy has a horizontal Phillips curve and experiences a recession, inflation: a. falls. b.does not change. c.rises sharply. d.rises, but not very much. e.falls sharply. 2)According to the Phillips curve, in general during an expansion a.inflation rises. b.inflation falls. c.unemployment falls. d.inflation is constant. e.prices fall. 3)If prices are flexible (as in the long run) and the Fed lowers the nominal interest rate (ceteris paribus), __________ and, as a result, __________. a.the real interest rate falls; short-run...
output andwhile the short-run model determines 42. The long-run model determines inflation. and potential; long-run inflation;...
output andwhile the short-run model determines 42. The long-run model determines inflation. and potential; long-run inflation; current output; current a. potential; unemployment; current output; long-run b. current; long-run inflation; unemployment; current d. potential; unemployment; unemployment; current e current; unemployment; potential output; curren 43. In the equation I,/Y, -a, -b(R,-), if b is close to zero, investment is not very sensitive to real interest rate changes. is very sensitive to changes in the marginal product of capital. is very sensitive to...
Suppose that workers and firms perfectly forecast inflation, so that the real wage remains unchanged as...
Suppose that workers and firms perfectly forecast inflation, so that the real wage remains unchanged as the price level rises over time. Prices and wages rise at the same rate, which implies that the real wage stays constant. The following graph shows the aggregate demand curve (AD) in an economy in long-run equilibrium. Assume the natural rate of unemployment is 6%, and potential output is $50 trillion. Use the orange points (square symbol) to draw the aggregate supply curve in...
20. Banks decide to raise the interest rate they pay on checking accoun action would A)...
20. Banks decide to raise the interest rate they pay on checking accoun action would A) increase money demand, shifting the LM curve up and to the ci B) increase money demand, shiftino the IM curve down and to the C) decrease money demand, shifting the M curve up and to the tem D) decrease money demand, shifting the LM curve down and to cing accounts from 1% to 2%. This curve down and to the right. & the LM...
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b....
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b. potential output; unemployment, current output; long-run inflation c. current output; long-run inflation; unemployment, current inflation d. potential output; unemployment; unemployment, current inflation e. current output: unemployment; potential output; current inflation andwhile the short-run model and , and 2. The IS curve describes short-run movements in an economy via which of the following? ↑Interest rate ↑ Investment → ↓ Output ↑Interest rate → ↓Investment →...
According to the long-run Phillips curve, if the central bank increases the growth rate of the money supply, a. inflation and unemployment both rise. b. inflation rises and unemployment falls. c. only employment rises. d. only infla
1. According to the long-run Phillips curve, if the central bank increases the growth rate of the money supply, a. inflation and unemployment both rise.b. inflation rises and unemployment falls.c. only employment rises.d. only inflation rises.
If the economy is at the natural rate of unemployment with the level of real GDP...
If the economy is at the natural rate of unemployment with the level of real GDP at potential output, what would expansionary fiscal or monetary policy do to the economy? How would the economy be effected in the short run and long run? Does the Phillips Curve theory explain what happens?
Which statement fails to describe the behavior of the Phillips curve? a/When output falls short of...
Which statement fails to describe the behavior of the Phillips curve? a/When output falls short of its potential, inflation decreases. b/When the economy is booming, inflation increases. c/A steeper Phillips curve causes inflation to necessarily increase. d/When the output is at potential, inflation remains constant. e/inflation changes are positively correlated with short-run output.
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run...
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run egun A) where the IS and LA curves intersect. Where the IS curve. Meurve. and FE lines inters C) where the IS curve intersects the FB fine. D) where the LM curve intersects the Fence he money supply will cause 27 In the Keynesian model in the short A) a decrease in output and an increase in the real B) an increase in the...
b) (2 points) What is the difference between nominal interest rate and real interest rate? Does...
b) (2 points) What is the difference between nominal interest rate and real interest rate? Does the central bank control the real or the nominal rate? What do we assume in our model? Financial Frictions in the short run model a) (2 points) What do you expect would happen to the economy when spreads increase? Specifically, what would happen to output and inflation during the period of the increase in spreads? b) (2 points) How do you think would the...
output andwhile the short-run model determines 42. The long-run model determines inflation. and potential; long-run inflation; current output; current a. potential; unemployment; current output; long-run b. current; long-run inflation; unemployment; current d. potential; unemployment; unemployment; current e current; unemployment; potential output; curren 43. In the equation I,/Y, -a, -b(R,-), if b is close to zero, investment is not very sensitive to real interest rate changes. is very sensitive to changes in the marginal product of capital. is very sensitive to...
Suppose that workers and firms perfectly forecast inflation, so that the real wage remains unchanged as the price level rises over time. Prices and wages rise at the same rate, which implies that the real wage stays constant. The following graph shows the aggregate demand curve (AD) in an economy in long-run equilibrium. Assume the natural rate of unemployment is 6%, and potential output is $50 trillion. Use the orange points (square symbol) to draw the aggregate supply curve in...
20. Banks decide to raise the interest rate they pay on checking accoun action would A) increase money demand, shifting the LM curve up and to the ci B) increase money demand, shiftino the IM curve down and to the C) decrease money demand, shifting the M curve up and to the tem D) decrease money demand, shifting the LM curve down and to cing accounts from 1% to 2%. This curve down and to the right. & the LM...
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b. potential output; unemployment, current output; long-run inflation c. current output; long-run inflation; unemployment, current inflation d. potential output; unemployment; unemployment, current inflation e. current output: unemployment; potential output; current inflation andwhile the short-run model and , and 2. The IS curve describes short-run movements in an economy via which of the following? ↑Interest rate ↑ Investment → ↓ Output ↑Interest rate → ↓Investment →...
E) none of the above un equilibrium occurs les intersect. 26. In the Keynesian model, short-run egun A) where the IS and LA curves intersect. Where the IS curve. Meurve. and FE lines inters C) where the IS curve intersects the FB fine. D) where the LM curve intersects the Fence he money supply will cause 27 In the Keynesian model in the short A) a decrease in output and an increase in the real B) an increase in the...
b) (2 points) What is the difference between nominal interest rate and real interest rate? Does the central bank control the real or the nominal rate? What do we assume in our model? Financial Frictions in the short run model a) (2 points) What do you expect would happen to the economy when spreads increase? Specifically, what would happen to output and inflation during the period of the increase in spreads? b) (2 points) How do you think would the...
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