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5% 4% 3% 2% 1% 0% -10% Shift the IS curve to the left until the new output gap is -5%. 0% -5% Unexpected inflation (Inflation Inflation expectations) 1% 10% 1 HS curve MP curve 5% Output gap Phillips curve Alter the interactive graph in order to witness how a leftward shift of the IS curve affects the output gap and unexpected inflation. Use the information to forecast economic outcomes. a. Which of the following could explain the shift witnessed in the IS-MP framework and result in lower unexpected inflation? Decreased consumer wealth stemming from depressed asset prices. Recent legislation that reduced taxes. Decreased business confidence recently revealed in a recent business confidence index estimate. An increase in financial market risk, leading to a negative output gap. Recent legislation that reduced government spending on infrastructure.

5% 4% 3% 2% 1% 0% -10% Shift the IS curve to the left until the new output gap is -5%. 0% -5% Unexpected inflation (Inflation Inflation expectations) 1% 10% 1 HS curve MP curve 5% Output gap Phillips curve Alter the interactive graph in order to witness how a leftward shift of the IS curve affects the output gap and unexpected inflation. Use the information to forecast economic outcomes. a. Which of the following could explain the shift witnessed in the IS-MP framework and result in lower unexpected inflation? Decreased consumer wealth stemming from depressed asset prices. Recent legislation that reduced taxes. Decreased business confidence recently revealed in a recent business confidence index estimate. An increase in financial market risk, leading to a negative output gap. Recent legislation that reduced government spending on infrastructure.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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b. If the initial decrease in a component of aggregate expenditure was $500 Billion, the total size of the shift in the IS cu $500 billion. will be c. What outcomes result from the shift that occurs in the IS-MP framework? no change in real interest rate higher real interest rate lower inflation boom equilibrium lower real interest rate Obust equilibrium Lno change in equilibrium output no change in inflation higher inflation
Transcribed Image Text:b. If the initial decrease in a component of aggregate expenditure was $500 Billion, the total size of the shift in the IS cu $500 billion. will be c. What outcomes result from the shift that occurs in the IS-MP framework? no change in real interest rate higher real interest rate lower inflation boom equilibrium lower real interest rate Obust equilibrium Lno change in equilibrium output no change in inflation higher inflation
Real interest rate 5% 4% 3% 2% 1% 0% -10% Shift the IS curve to the left until the new output gap is -5%. 0% -5% Unexpected inflation (Inflation Inflation expectations) 1% I IS curve MP curve 5% Output gap Phillips curve Alter the interactive graph in order to witness how a leftward shift of the IS curve affects the output gap and unexpected inflation. Use the information to forecast economic outcomes. a. Which of the following could explain the shift witnessed in the IS-MP framework and result in lower unexpected inflation? Decreased consumer wealth stemming from depressed asset prices. Recent legislation that reduced taxes. Decreased business confidence recently revealed in a recent business confidence index estimate. An increase in financial market risk, leading to a negative output gap. Recent legislation that reduced government spending on infrastructure.
Transcribed Image Text:Real interest rate 5% 4% 3% 2% 1% 0% -10% Shift the IS curve to the left until the new output gap is -5%. 0% -5% Unexpected inflation (Inflation Inflation expectations) 1% I IS curve MP curve 5% Output gap Phillips curve Alter the interactive graph in order to witness how a leftward shift of the IS curve affects the output gap and unexpected inflation. Use the information to forecast economic outcomes. a. Which of the following could explain the shift witnessed in the IS-MP framework and result in lower unexpected inflation? Decreased consumer wealth stemming from depressed asset prices. Recent legislation that reduced taxes. Decreased business confidence recently revealed in a recent business confidence index estimate. An increase in financial market risk, leading to a negative output gap. Recent legislation that reduced government spending on infrastructure.
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