Macroeconomics (9th Edition)
9th Edition
ISBN: 9780134167398
Author: Andrew B. Abel, Ben Bernanke, Dean Croushore
Publisher: PEARSON
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Question
Chapter 13, Problem 4AP
a)
To determine
To know: The effect of supply shock on country’s net exports.
b)
To determine
To know: The effect on net exports when there is temporary increase in money supply.
c)
To determine
To check: Whether prediction made is confirmed or contradicted about spending behavior.
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Students have asked these similar questions
Consider a country whose economic structure matches the assumptions of the classical model. After reading a recent best-seller documenting a growing population of low-income elderly people who were ill prepared for retirement, most residents of this country decide to increase their saving at any given interest rate. Explain whether or how this could affect the following:
a. The current equilibrium interest rate
b. Current equilibrium real GDP
c. Current equilibrium employment
d. Current equilibrium investment
e. Future equilibrium real GDP
Using graphs, explain how interst rate works in the classical system to stabilise aggregate demand in the face of autonomous changes in components of aggregate demand such as investment or government spending.
are these the correct answers?
1) In the classical view, if savings exceeds investment borrowing in the economy interest rates will fall.- true
2) The self adjustment process began with falling wages and then allowed for prices to fall and sales to increase. -true
3)In the classical model, a reduction in AD leads to a new equilibrium at a very low rate of output and employment. -false
Chapter 13 Solutions
Macroeconomics (9th Edition)
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