Describe the determinants of the long-run real interest rate and speculate on the sort of events that would make it fluctuate.
Answer to relevant QuestionsExplain how and why the components of aggregate expenditure depend on the real interest rate. Be sure to distinguish between the real and nominal interest rates, and explain why the distinction matters. Suppose the real interest rate unexpectedly falls in the absence of other economic changes. What would you expect to happen to (a) Consumption,(b) Investment, and (c) Net exports? The European Central Bank’s primary objective is price stability. Policymakers interpret this objective to mean keeping inflation below, but close to, 2 percent, as measured by a euro-area consumer price index. In ...How often is negative supply shocks associated with recessions? Plot on a quarterly basis since 1971 the real price of oil measured as the ratio of the nominal price of oil (FRED code: OILPRICE) to the U.S. Consumer Price ...Suppose that consumer confidence unexpectedly rises six months before the central bank detects the change or its magnitude. Compared to your answer to Problem 11, what happens to inflation and output in that six-month ...
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