Financial Crisis Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. Refer to Financial Crisis. What happens to the price level and real GDP in the short run? Select one: a. the price level falls and real GDP rises O b. the price level rises and real GDP falls O C. both the price level and real GDP fall O d. both the price level and real GDP rise

Financial Crisis Suppose that banks are less able to raise funds and so lend less. Consequently, because people and households are less able to borrow, they spend less at given price level than they would otherwise. The crisis is persistent so lending should remain depressed for some time. Refer to Financial Crisis. What happens to the price level and real GDP in the short run? Select one: a. the price level falls and real GDP rises O b. the price level rises and real GDP falls O C. both the price level and real GDP fall O d. both the price level and real GDP rise

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups. a homeowner with a fixed-rate mortgage. a union worker with a fixed labor contract a company that has invested some of its endowment in a government bonds which pay a fixed rate of return. 5. Indicate how each of the following events would affect the aggregate demand AD curve: a short-run decrease in the price level an increase in consumer confidence on the price level and real GDP an increase in government purchases
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2. Suppose country A has a central bank with full credibility, and country B has a central bank with no credibility.Using a graph of aggregate demand and supply EXPLAIN how the credibility of each country’s central bank affect economic outcomes, if both countries are hit with the samea) positive aggregate demand shock? b) negative temporary aggregate supply shock? EXPLAIN EVERTHING IN DETAIL PLEASE
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Real Interest Rate R It (a) B (b) G (c) F (d) C (e) D ******** F Figure 8.1 The IS curve ************* 0 A E 18₂ B D ISA 1So Short-Run output Ÿ 18. Consider the IS curve in Figure 8.1. If the interest rate increases and there is a positive aggregate demand shock, the economy will move from point A to point
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