Question 20 Hide Correct Answer Show Responses Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desired output). The current real interest rate, r, is 0.05 and the investment function reads 1 = 20-200r. The mpc is 0.5. By how much should the central bank decrease the real rate to close the output gap? Answer up to two decimal points
Question 20 Hide Correct Answer Show Responses Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desired output). The current real interest rate, r, is 0.05 and the investment function reads 1 = 20-200r. The mpc is 0.5. By how much should the central bank decrease the real rate to close the output gap? Answer up to two decimal points
Chapter10: Kenesian Macroeconomics And Economic Instability: A Critique Of The Self Regulating Economy
Section: Chapter Questions
Problem 11QP
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Can I have easy explanations to these please. I do not understand.
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Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desired
output). The current real interest rate, r, is 0.05 and the investment function reads 1 = 20-200r. The mpc is 0.5. By how
much should the central bank decrease the real rate to close the output gap? Answer up to two decimal points
Transcribed Image Text:Question 23
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Suppose the potential output is 50 trillion and autonomous spending is 10 trillion. Compute the mpc.
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potential output level means that economy is producing at full capacity and beyond that production cannot be done with same resources and technology.
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