Describe how the real interest rate changes in a Keynesian model if a shock shifts the IS curve down and to the right and the Fed changes its policy to keep output unchanged
What will be an ideal response?
If the Fed is going to keep output unchanged, then it will tighten monetary policy, reducing the money supply to offset the shift of the IS curve. The tighter monetary policy will mean that the real interest rate is higher. The LM curve shifts up and to the left, or the LR curve shifts up.
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a. True b. False Indicate whether the statement is true or false
The belief that everyone should have exactly the same amount of income is
A) merit standard.
B) comparable-worth doctrine.
C) egalitarian principle.
D) Lorenz principle.
The recurrent ups and downs in the level of economic activity extending over several years are a description of a:
A. recession. B. business cycle. C. business trough. D. noncyclical fluctuation.
What is the social cost of a monopoly? Explain
What will be an ideal response?