Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 10, Problem 2NP
a)
To determine
The equilibrium values of output, real interest rate,
b)
To determine
The equilibrium values of output, real interest rate, price level, consumption and investment using the IS-LM model and to determine if the money is neutral as per the given case.
c)
To determine
The equilibrium values of output, real interest rate, price level, consumption and investment using the IS-LM model and to determine if the fiscal policy is neutral as per the given case.
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Students have asked these similar questions
Suppose that the government decreases spending more than is necessary to close an inflationary gap. What is the MOST likely result?
Inflation will increase.
The price level will increase.
Aggregate output will fall short of potential output.
Aggregate output will increase.
Suppose that planned investment and planned government purchases do not depend on income:
| = 15 and G = 17. Consumption, as you would expect, does depend on income via the
consumption function C = 2 + 0.75Y – 0.75T. Net taxes are T = 12.
Your friend thinks that the equilibrium will be where Y = 150 but he is wrong. What is the best
description of this situation?
the (Y, AE) point is above the 45 degree line, Y will adjust down
the (Y, AE) point is above the 45 degree line, Y will adjust up
the (Y, AE) point is below the 45 degree line, Y will adjust down
the (Y, AE) point is below the 45 degree line, Y will adjust up
Automatic stabilizers
a)increase consumption during a recession above what it would otherwise be in their absence.
b)make GDP more volatile.
c)reduce the budget deficit during a recession.
e)decrease consumption during a recession below what it would otherwise be in their absence.
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