QUESTION 1Consider the IS curve Ỹ₁=ā-b(R₁-r) and suppose ā=0¹ b=1, R₁ =r=5%, and the real interest rate falls to R₁' = 4%. In thistscenario, the economy would, in the short-run:a. move from its long-run equilibrium to 1 percent below its potential.b. move from its long-run equilibrium to 1 percent above its potential.c. remain at its long-run equilibrium.d. have reduced output.e. move from 1 percent below its potential to its long-run equilibrium.QUESTION 2According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession causedin aggregate demand, leading toin output relative to potential output.a. an increase / a reductionO b. a reduction / a reductionO c. a reduction / an increased. an increase / an increase

IS-MP framework: IS-MP model is widely used to denote the simultaneous equilibrium in product and…

QUESTION 1 Ỹ₁=ā-b(R₁-r) and suppose a=0₁ b=1, R₁ =r=5%, and the real interest rate falls to R' = 4%. In this Consider the IS curve t scenario, the economy would, in the short-run: O a. move from its long-run equilibrium to 1 percent below its potential. Ob. move from its long-run equilibrium to 1 percent above its potential. O c. remain at its long-run equilibrium. O d. have reduced output. O e. move from 1 percent below its potential to its long-run equilibrium. QUESTION 2 According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession caused in aggregate demand, leading to in output relative to potential output. O a. an increase / a reduction O b. a reduction / a reduction O c. a reduction / an increase O d. an increase / an increase

QUESTION 1 Ỹ₁=ā-b(R₁-r) and suppose a=0₁ b=1, R₁ =r=5%, and the real interest rate falls to R' = 4%. In this Consider the IS curve t scenario, the economy would, in the short-run: O a. move from its long-run equilibrium to 1 percent below its potential. Ob. move from its long-run equilibrium to 1 percent above its potential. O c. remain at its long-run equilibrium. O d. have reduced output. O e. move from 1 percent below its potential to its long-run equilibrium. QUESTION 2 According to the IS-MP / AS-AD framework, the increase in risk premia for private sector borrowing during the Great Recession caused in aggregate demand, leading to in output relative to potential output. O a. an increase / a reduction O b. a reduction / a reduction O c. a reduction / an increase O d. an increase / an increase

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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