Consider this shock: Ax >0 in the real intertemporal model with investment. That is, an increase in credit market uncertainty (x↑). This shock causes all of the following except O a direct fall in investment (IL) O a reduction in the borrowing interest rate (r'!), which is equal to the sum ofr plus x O a contraction of the labor supply (N$L) a contraction of the output demand (Yd)
Consider this shock: Ax >0 in the real intertemporal model with investment. That is, an increase in credit market uncertainty (x↑). This shock causes all of the following except O a direct fall in investment (IL) O a reduction in the borrowing interest rate (r'!), which is equal to the sum ofr plus x O a contraction of the labor supply (N$L) a contraction of the output demand (Yd)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider this shock: Ax >0 in the real intertemporal model with investment. That is, an increase in credit market uncertainty (xt). This shock causes all of the following except
O a direct fall in investment (I.)
O a reduction in the borrowing interest rate (r), which is equal to the sum of r plus x
a contraction of the labor supply (NSL)
a contraction of the output demand (YdL)
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