Graphical (1) Suppose the Fed raises the real interest rate and consumer confidence falls around the same time (as occurred in 1990). Show with a graph what happens to the AE and Phillips curves and to output and inflation.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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I need help can you draw a good graph
## Graphical

1. Suppose the Fed raises the real interest rate and consumer confidence falls around the same time (as occurred in 1990). Show with a graph what happens to the AE and Phillips curves and to output and inflation.

*Note to students: When constructing the graph, remember to illustrate how an increase in the real interest rate can lead to a decrease in aggregate expenditure (AE) and potentially shift the Phillips curve. Consider how these changes can impact output and inflation. Use historical data from 1990 as a reference point for your analysis.*

---

## Analytical

3. Assume the monetary base is $100 million, the currency drain ratio is 0.1. (a) Calculate the money multiplier.

*Include detailed calculations and explanations to demonstrate your understanding of how changes in the monetary base and the currency drain ratio affect the money supply in an economy.*
Transcribed Image Text:## Graphical 1. Suppose the Fed raises the real interest rate and consumer confidence falls around the same time (as occurred in 1990). Show with a graph what happens to the AE and Phillips curves and to output and inflation. *Note to students: When constructing the graph, remember to illustrate how an increase in the real interest rate can lead to a decrease in aggregate expenditure (AE) and potentially shift the Phillips curve. Consider how these changes can impact output and inflation. Use historical data from 1990 as a reference point for your analysis.* --- ## Analytical 3. Assume the monetary base is $100 million, the currency drain ratio is 0.1. (a) Calculate the money multiplier. *Include detailed calculations and explanations to demonstrate your understanding of how changes in the monetary base and the currency drain ratio affect the money supply in an economy.*
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