Macroeconomics
4th Edition
ISBN: 9780393602487
Author: Jones, Charles I.
Publisher: W. W. Norton & Company
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Question
Chapter 11, Problem 1E
(a)
To determine
The short-run effect of an increase in the interest rate.
(b)
To determine
The short-run effect of a fall in the rate of interest.
(c)
To determine
The short-run effect of a 1 percent point increase in
(d)
To determine
The short-run effect of a 2 percent decrease in
(e)
To determine
The short-run effect of a 1 percent point increase in
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Calculations with the IS curve: Suppose the parameters of the IS curve are a = 0,b = 3/4, r = 2% and the real interest rate is initially R = 2%. Explain whathappens to short-run output in each of the following scenarios (consider eachseparately):(a) Te real interest rate rises from 2% to 4%.(b) Te real interest rate falls from 2% to 1%.(c) ac increases by 1 percentage point.(d) ag decreases by 2 percentage points.(e) aim decreases by 2 percentage points.
The following set of equations describe an
economy:
C = 14,400+ 0.5 (YT) - 40,000r
lp = 8,000 - 20,000r
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NX = 1,800
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Y* = 40,000
Suppose that the real interest rate (r) is 10%. Is the
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(a) substitution effect of the real interest rate change;
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