6. Your day as chair of the Fed (II): With the goal of stabilizing output, explain howand why you would change the interest rate in response to the following shocks.Show the effects on the economy in the short run using the IS-MP diagram.avOOD(a) Consumers become pessimistic about the state of the economy and futureproductivity growth.(b) Împrovements in information technology increase productivity and there-fore increase the marginal product of capital.$191qedo airsleb (c) A booming economy in Europe this year leads to an unexpected increasein the demand by European consumers for U.S. goods.oxfor(d) Americans develop an infatuation with all things made in New Zealandni tugh and sharply increase their imports from that country.(e) A large earthquake destroys many houses and buildings on the West Coast,but fortunately results in little loss of life.(f) A housing bubble bursts, so that housing prices fall by 20% and new homeoba sales drop sharply.) (o) ansq stortExercises 351

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6. Your day as chair of the Fed (II): With the goal of stabilizing output, explain how and why you would change the interest rate in response to the following shocks. Show the effects on the economy in the short run using the IS-MP diagram. (a) Consumers become pessimistic about the state of the economy and future productivity growth. (b) Improvements in information technology increase productivity and there- fore increase the marginal product of capital. ob (c) A booming economy in Europe this year leads to an unexpected increase in the demand by European consumers for U.S. goods. alog Heal

6. Your day as chair of the Fed (II): With the goal of stabilizing output, explain how and why you would change the interest rate in response to the following shocks. Show the effects on the economy in the short run using the IS-MP diagram. (a) Consumers become pessimistic about the state of the economy and future productivity growth. (b) Improvements in information technology increase productivity and there- fore increase the marginal product of capital. ob (c) A booming economy in Europe this year leads to an unexpected increase in the demand by European consumers for U.S. goods. alog Heal

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 6PA

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