In the figure above, assume that output is $10.5 trillion, while potential output is $12 trillion. If a fiscal stimulus package is implemented quickly, raising output to $12 trillion, while inflation remains constant at one percent, then the figure implies that the real interest rate will be ________ percent. A) 1.5
In the figure above, assume that output is $10.5 trillion, while potential output is $12 trillion. If a fiscal stimulus package is implemented quickly, raising output to $12 trillion, while inflation remains constant at one percent, then the figure implies that the real interest rate will be ________ percent. A) 1.5
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
- In the figure above, assume that output is $10.5 trillion, while potential output is $12 trillion. If a fiscal stimulus package is implemented quickly, raising output to $12 trillion, while inflation remains constant at one percent, then the figure implies that the real interest rate will be ________ percent.
- A) 1.5
- B) zero
- C) one
- D) 0.5
- E) 2.5
![Real Interest
Rate, r
(percent)
2.5
2.0
1.5
Real Interest
Rate, r
(percent)
NN-
505
2.5
2.0
1.5
Inflation
Rate,
(percent)
3.0
2.0
1.0
1.0 2.0 3.0 Inflation Rate,
(percent)
9.5 10.0 10.5
MP
9.5 10.0 10.5
12.0 12.5 13.0
Aggregate Output, Y
($ trillions)
15₂
12.0 12.513.0
Aggregate Output, Y
($ trillions)
AD
AD₁](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4dbc48a2-4a4c-40ed-a304-5cbd1c5f2dd6%2Fef2a51e6-d540-4161-92ed-8d84bb9cc030%2F0odhpu4_processed.png&w=3840&q=75)
Transcribed Image Text:Real Interest
Rate, r
(percent)
2.5
2.0
1.5
Real Interest
Rate, r
(percent)
NN-
505
2.5
2.0
1.5
Inflation
Rate,
(percent)
3.0
2.0
1.0
1.0 2.0 3.0 Inflation Rate,
(percent)
9.5 10.0 10.5
MP
9.5 10.0 10.5
12.0 12.5 13.0
Aggregate Output, Y
($ trillions)
15₂
12.0 12.513.0
Aggregate Output, Y
($ trillions)
AD
AD₁
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