In the basic New Keynesian model, suppose that there is an increase in the future marginal product of capital. Assume that the central bank has a quadratic loss function. a. If the central bank does nothing, then current inflation will and current output will decrease. increase. not change.

In the basic New Keynesian model, suppose that there is an increase in the future marginal product of capital. Assume that the central bank has a quadratic loss function. a. If the central bank does nothing, then current inflation will and current output will decrease. increase. not change.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In the basic New Keynesian model, suppose that there is an increase in the future marginal product of capital. Assume that the central bank has a quadratic loss function.
a. If the central bank does nothing, then current inflation will
and current output will
decrease.
increase.
not change.

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