QUESTION 24 1 points Suppose we assumei-J-1,«F-5% and the real interest rate ris

Question

QUESTION 24 1 points Suppose we assumei-J-1,«F-5% and the real interest rate rises to R,-6% In this scenaro of the IS curve, the o a have increased output. eso n ould he sh rt un. b move from its long-run equilibrium to 1 percent below its potential. C move from its long-run equilibrium to 1 percent above its potential o d. move from 1 percent below its potential to its long-run equilibrium. remain at its long-run equilibrium. QUESTION 25 1 points Suppose we assume that initially a b- 5, Rt-r-5% fa, rises 2 percent and the real interest rate falls 2 percent, short-run output: o a falls 1 percent. brises 3 percent. O C does not change. o d rises 1 percent. e.falls 2 percent

Explanation / Answer

24> b> move from it's...

Reason

In the long run, the output level does not change with output, thus in the short run, due to higher interest rate, the GDP decreases but the decrease is temporary.

25> c> does not change

Reason

Due to the hike in a, there is an increase in Y but as i also increased, the effect is mitigated.

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