Assume we are currently in an equilibrium where actual output is equal to potential output. If consumers become more optimistic about the future of the economy, the USD depreciates relative to other currencies, and the Federal Reserve announces an interest rate cut, what do we expect to happen? Output gap stays the same, unemployment decreases, unexpected inflation is unchanged O Output gap increases, unemployment increases, unexpected inflation increases O There isn't enough information to tell O Output gap increases, unemployment decreases, unexpected inflation increases

Assume we are currently in an equilibrium where actual output is equal to potential output. If consumers become more optimistic about the future of the economy, the USD depreciates relative to other currencies, and the Federal Reserve announces an interest rate cut, what do we expect to happen? Output gap stays the same, unemployment decreases, unexpected inflation is unchanged O Output gap increases, unemployment increases, unexpected inflation increases O There isn't enough information to tell O Output gap increases, unemployment decreases, unexpected inflation increases

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 8PA

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Please no written by hand solution Consider a scenario of a closed economy in the short run where price level is fixed. Assume that bothtaxes and money supply increase in a way that keep output constant in equilibrium (suppose that themarginal propensity to consume is less than one). Which of the following may result from the policychange?a) It will lead to an increase in investment but a decrease in consumption.b) It will result in an increase in investment but a decrease in government spending.c) It will lead to an increase in investment and private saving.d) It will decrease investment but increase in public saving.
Assume that an economy is experiencing simultaneous equilibrium in both the product market and money market. Furthermore, assume the MPC is currently around a normal level of 0.65 and the sensitivity of real money demand to also around a normal level. What is meant by the term crowding out? In your answer also explain the implications of crowding out for the macroeconomy.
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..
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