For each of the following changes, which equilibrium curve (IS, LM, or FE) is shifted? Draw the change in the underlying demand or supply curves (for example, money demand and supply for the LM curve) and show how the equilibrium curve changes.(a)Expected inflation increases.(b)The future marginal productivity of capital increases.(c)Labor supply decreases.(d)Future income declines.(e)There's a temporary beneficial supply shock.(f)The nominal interest rate on money rises.
What will be an ideal response?
(a) | LM shifts down and to the right. |
(b) | IS shifts up and to the right. |
(c) | FE shifts left. |
(d) | IS shifts down and to the left. |
(e) | FE shifts right. |
(f) | LM shifts up and to the left. |
You might also like to view...
Describe some of the problems in testing the Heckscher-Ohlin theory
What will be an ideal response?
During the Great Depression, the money supply fell 28%. During that same time, the monetary base ____ and the currency-to-deposit ratio and reserve-to-deposit ratios both _____
a. rose; fell b. rose; rose c. fell; rose d. fell; fell
In a market with a bilateral monopoly:
A) there is a single buyer and a single seller. B) there are many buyers and a single seller. C) there is a single buyer and few sellers. D) there are a few buyers and many sellers. E) there are a few buyers and a few sellers.
Suppose private saving in a closed economy is $12b and investment is $10b
a. National saving must equal $12b. b. Public saving must equal $2b. c. The government budget surplus must equal $2b. d. The government budget deficit must equal $2b.