I51: Y1t=a-b(Rt-F) Given these two curves, it appears that the economies are identical except that they respond differently to interest rate changes. Suppose we assume that a =0, b1=1,52-0.5, R =F=5%. If the real interest rate in each economy falls to 4%, then CA Country 1 will move from 0.5 percent below its potential to its long-run equilibrium and Country 2 will move from its long-run equilibrium to 2 percent above its potential. OB. neither country will move away from its long-run equilibrium. oc Country 1 will move from its long-run equilibrium to 1 percent above its potential and Country 2 will move from its long-run equilibrium to D0.5 percent below its potential. OD. Country 1 will move from its long-run equillbrium to 1 percent above its potential and Country 2 wil move from its long-run equilibrium to 0.5 percent above its potential. Country 1 will move from its long-run equilibrium to 01 percent below its potential and Country 2 will move from its long-run OE equilibrium to 0.5 percent above its potential.

I51: Y1t=a-b(Rt-F) Given these two curves, it appears that the economies are identical except that they respond differently to interest rate changes. Suppose we assume that a =0, b1=1,52-0.5, R =F=5%. If the real interest rate in each economy falls to 4%, then CA Country 1 will move from 0.5 percent below its potential to its long-run equilibrium and Country 2 will move from its long-run equilibrium to 2 percent above its potential. OB. neither country will move away from its long-run equilibrium. oc Country 1 will move from its long-run equilibrium to 1 percent above its potential and Country 2 will move from its long-run equilibrium to D0.5 percent below its potential. OD. Country 1 will move from its long-run equillbrium to 1 percent above its potential and Country 2 wil move from its long-run equilibrium to 0.5 percent above its potential. Country 1 will move from its long-run equilibrium to 01 percent below its potential and Country 2 will move from its long-run OE equilibrium to 0.5 percent above its potential.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 12SQ

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