The IS-LM view of the world with more complex financial markets Consider an economy described by the figure on the right. The units on the vertical axis of the figure are If the nominal policy interest rate is 6% and the expected rate of inflation is 2%, the value for the vertical intercept of the LM curve is Suppose the nominal policy interest rate is 6%. If expected inflation decreases from 2% to 1%, in order to keep the LM curve from shifting, the central bank must the nominal policy rate of interest to %. If the expected rate of inflation were to decrease from 2% to 1%, the IS curve f the expected rate of inflation were ip decrease from 2% o 1%, the LM curve A. shifts up regardless of central bank actions. OB. shifts down unless the central bank acts to offset. OC. shifts up unless the central bank acts to offset. O D. will remain in its initial location regardless of central bank actions. Policy rate, TL 0 IS' IS A A' Output, Y

The IS-LM view of the world with more complex financial markets Consider an economy described by the figure on the right. The units on the vertical axis of the figure are If the nominal policy interest rate is 6% and the expected rate of inflation is 2%, the value for the vertical intercept of the LM curve is Suppose the nominal policy interest rate is 6%. If expected inflation decreases from 2% to 1%, in order to keep the LM curve from shifting, the central bank must the nominal policy rate of interest to %. If the expected rate of inflation were to decrease from 2% to 1%, the IS curve f the expected rate of inflation were ip decrease from 2% o 1%, the LM curve A. shifts up regardless of central bank actions. OB. shifts down unless the central bank acts to offset. OC. shifts up unless the central bank acts to offset. O D. will remain in its initial location regardless of central bank actions. Policy rate, TL 0 IS' IS A A' Output, Y

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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