Question

This question combines three events: a decline in consumer confidence, a decrease in taxes, and expansionary monetary policy. Assume that the economy was in its long-run equilibrium before these events. Use a Keynesian model (do not assume Ricardian Equivalence). In the short run: the effect of the decline in consumer confidence is that the Select] curve Select) and the Select + curve Select) the effect of the decrease in taxes is that the [Select] curve [Select] • and the Select curve Select) the effect of expansionary monetary policy is that the Select) curve Select) • and the Select) curve Select Overall, we • know that in the short run (Select] 4 Select] and Select)

The three parts that start with "The effect" the possible answets for the blanks are.

First blank- IS, FE, LM

Second blank- Shifts Left , Shifts riggt

Third blank- AD, SRAS, LRAS,

Fourth blank- shifts right/up , shifts left/down

The last section options are "Overall, we know that in the short run <output definitely decreases OR output defiently increases OR there is no effect on output OR the effect on output is unclear and depends in ghe relative magnitufe of ghr shifts>, < the interest rate definietly increases OR the interest rate defineutly decreases OR the effect on the interest rate in unclear and depends on the reltive magnitude of the shifts OR there us no effect on the interest rate> , and < price definietly increases OR price definietly decreases OR there is no effect on price OR the effect on the price is unclear and depends on the relative magnitudes of the shift >

Answer 1

5 Р LRAS SRAS and P2 ។ 1 va A Po Pi A B q v AD2 AD decline in consumes confidence Is curve shifts left AD Curre shiff left Deaneare in taxes Is curve shift right AD Curve shifts right Expansioenary monetary policy Luo cuore shifts right and AD curve shift right Overall, in short run output effects on it unclear interest rate unclear price luul unclear ADO ?у o 8 LM v LM' x IS' IS ty