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

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter24: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 8PA

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QUESTION 10 Suppose we assume a 0, b 1, R =r%3D5% and the real interest rate rises to 6 percent. In this scenario of the IS curve, the economy will, in the short run, OA. have increased output. OB. move from its long-run equilibrium to 1 percent below its potential. OC. move from 1 percent below its potential to its long-run equilibrium. O D.remain at its long-run equilibrium. O E. move from its long-run equilibrium to 1 percent above its potential. LG
Suppose the economy is in a long-run equilibrium. There is a simultaneous increase in the money supply, a tax cut, an increase in the level of investment confidence about future business conditions, and a depreciation of the Canadian dollar. In the short run, what would you expect to happen given a positively sloped SRAS curve? Select one: O a. The price level and real GDP will both increase. cross out O b. The price level and real GDP will both cross out decrease. O c. The price level and real GDP will both stay the cross out same. O d. The price level will increase, and the real GDP cross out will decrease. O e. The effect on the price level and real GDP is cross out indeterminate.
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