Can someone explain to me how they got the answer? Suppose there is a negative output gap of 12 (the output gap is the difference between current output and desiredoutput). The current real interest rate, r, is 0.05 and the investment function reads I1 = 20- 200r. The mpc is 0.5. By howmuch should the central bank decrease the real rate to close the output gap? Answer up to two decimal points0.03

Given information:There is a negative output gap of 12. In order to close the output gap, the output…

Answered: Suppose there is a negative output gap…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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