Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter22: Inflation
Section: Chapter Questions
Problem 18RQ: What is deflation?
Related questions
Question
Use graph A on the right to determine what happens to the equilibrium values of the interest rate and output when there is
an increasean increase
in government spending (G) with the Fed changing the money supply
(M Superscript S)
by enough to keepby enough to keep
interest rates constantinterest rates constant.
1.) Using the 3-point curved line drawing tool, illustrate the impact of the
increaseincrease
in G. Properly label your curve.2.) Using the line drawing tool, illustrate the impact of the Fed's money supply decision. Properly label your curve.
3.) Using the point drawing tool, identify the economy's new equilibrium point.
Use graph B on the right to determine what happens to the equilibrium values of the interest rate and output when there is
anan
increaseincrease
in
Upper GG
with no change in
the money supplythe money supply.
1.) Using either the 3-point curved line drawing tool to shift the IS curve or using the line drawing tool to shift the Fed rule curve, illustrate the impact of the
increaseincrease
in
Upper GG.
Properly label your curve.2.) Using the point drawing tool,
identify
the economy's new equilibrium point.graph a and b are attached
Transcribed Image Text:Interest rate, r
Graph A
Fed rule
IS
Y*
Aggregate output (income), Y
☑
Transcribed Image Text:Interest rate, r
Y*
Fed rule
IS
Aggregate output (income), Y
☑
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