The following picture represents IS-LM and PC for an economy.Which of the following statements are correct? (Multiple correct answers are possible)YnYnPCIf the real interest rate is 5%, the economy experiences a negative output gapThe natural real rate of interest is positiveIf the real interest rate is 5%, the economy's inflation is decreasingIf the real interest rate is 5%, the economy experiences deflationThe natural real rate of interest is negative

From the analysis of the IS-LM and PC curves, the only correct option is:The natural real rate of…

Answered: The following picture represents IS-LM…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 11PA

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Similar questions

Economists expect that as the labor market continues to tighten going into the latter part of 2015 that workers should begin to expect wage increases in 2015 and 2016. Assuming this occurs and it was the only development in the labor market that year, how would this affect the AS curve? What if it was also accompanied by an increase in worker productivity?
Suppose a market basket of goods and services costs $400 in the base 'year and the consumer price index (CPI) is currently 125. This indicates the price of the market basket of goods is now: $275. $425. $500. $525. Which of the following will most likely occur during the recessionary phase of a business cycle? O Real GDP nises, and the unemployment rate falls O Real GDP declines, and the rate of inflation nises O The sales of most businesses decline, and the unemployment rate nses Inflation rises, and employment population ratio falls
Consider an economy described by the following equations:Y=C+I+GC=100+0.75(Y-T)I=500-50rG=125T=100wher Yis GDP,C is consumpton,I is investment,G is government purchases,T is taxes,and r is the interest rate.If the economy were at full employment that is , at its natural rate,GDP would be 2,000.a.Explain the meaning of each of these equations.b.What is the marginal propensity to consume in this economy?c.Suppose the central bank's policy is to adjust the money supply to maintain the interest rate at 4 percent,so r=4.Solve for GDP.How does it compare to the full employment level?d.Assuming no change in monetary policy,what change in government purchases would restore full employment?e.Assuming no change in fiscal policy,what change in interest rate would restore full employment?
What would be the effect of the following on the equilibrium level of real interest rates: • Households are worried about what is going to happen to their health insurance plans and decide so save more. Oreal interest rate would increase O real interest rate would decrease O real interest rate would remain unchanged O the effect is not possible to determine from the information provided
Which of the following graphs shows what would happen to the investment line if the real interest rate decreases? O Real interest rate Real interest rate Real interest Real interest rale ● Total investment Investment line Total investment Total investment Total investment
this is true or false: an increase in AS will result in more jobs for the economy as long as we are not at full employment output i understand an increase in AS will result in more jobs for the economy, but i dont understand the last part of the question. "as long as we are not at full employment output". doesnt the AS curve become vertical at Qfe? can you explain this for me? idk whether this is true or false.
Suppose that in Macroland the consumption and the investment have a negative relationship withthe real interest rate and positive relationship with Y. The Central Bank of the country targets acertain nominal interest rate and lets the money supply adjust in order to reach that interest rate.a. Draw a graph of the IS-LM model in this situation.b. Suppose that the Central Bank announces an increase of the interest rate in the future.Represent graphically the initial position of IS-LM curves. Then, show the IS-LM curves of thefuture, after the announced increase in the interest rate is implemented. (Assume that the ISis constant.).c. Suppose that agents today take into consideration the resulting income of the future whendeciding the amount of consumption and investment. Show what happens to the IS-LMcurves today after the announcement of the CB (tip: the CB is NOT increasing the nominalinterest rate today).d. The government decides to step in and avoid any deviation of Y from the initial…
Between a trough and a peak, the economy goes through a(n) Ohyperinflation. Obust. Orecession. O expansion. QUESTION 16 A period when the economy shrinks is known as O a recession. O a contraction. O a slump. O All of these. QUESTION 17 Dean borrows $400 from Tim. Tim wants to make a 10% real return on his money, so they both agree on a 10% interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 4% next year. In this case, O Dean is better off. O Tim will receive more than 10% of real rate of return a year from now. O Dean will pay $56 a year from now on. Tim is better off.
Which of the following best describes the real interest rate? Select the correct answer below: O the rate of interest after allowing for inflation O the rate of inflation minus the nominal interest rate O the nominal interest rate plus minimum wage the rate of inflation minus the minimum wage
1. Explaining short-run economic fluctuations A majority of economists believe that in the long run, real economic variables and nominal economic variables beha independently of one another. For example, an increase in the money supply, a variable, will cause the price level, a variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a variabl The distinction between real variables and nominal variabl is known as ▼ However, in the short run, most economists believe that re and nominal variables are intertwined. Economists use the model of aggregate demand and aggregate supply to examine the economy's short-run fluctuations around the long-run output level. The following graph shows an incomplete short-run aggregate demand (AD) and aggrega supply (AS) diagram-it needs appropriate labels for the ax and curves. In the questions that follow you will identify so of the missing labels. X AD HORIZONTAL AXIS VERTICAL AXIS The…
Assume that an economy operates according to the sticky-wage model. The nominal wagewas set to make labor supply and labor demand equal when the expected price levelequaled 120 (as measured by the consumer price index).a. Use a graph of the labor market to illustrate what happens to the quantity oflabor employed if the actual price level over the time period when wages arestuck equals 110.b. Use a graph of the production function to illustrate how the quantity of outputproduced changes if the actual price level equals 110 when the expected pricelevel is 120.c. Given the unexpectedly low price level, will this economy be operating above,below, or at the natural rate?
Which of the following could potentially cause a recession? O AD increases, and wages are sticky. O AD increases, and wages are flexible. O AD falls, and wages are flexible. AD decreases, and wages are sticky.

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