What is wrong (if anything) with each of the following statements? The Intermediate Run in macroeconomic modeling
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Question:
- What is wrong (if anything) with each of the following statements?
- “The ‘Intermediate Run’ in macroeconomic modeling refers to a period of no longer than one year”
- “In the ‘Intermediate Run’, prices and wages are sticky, so that persistent periods of involuntary unemployment can exist”
- “The real interest rate equals the nominal interest rate plus the rate of expected inflation”
- “The Marginal Propensity to Consume (MPC) is measured as the change in income divided by the change in consumption—DY/DC.”
- “The Marginal Propensity to Consume (MPC) minus the Marginal Propensity to Save (MPS) equals zero.”
- “Money demand is negatively related to the price level”
- “In the ‘Intermediate Run,’ an increase in the real interest rate leads to a reduction in Investment and an increase in Consumption.”
- “Because of the Classical Dichotomy, the monetary conditions in the nominal side of the economy have a direct impact on conditions in the real side of the economy.”
- “In the ‘Intermediate Run’, the aggregate supply curve is upward sloping.”
- “In the ‘Intermediate Run’ model, an increase (a rightward shift) in the ‘IS’ curve will lead to an increase in output and an increase in the real interest rate.”
- “In the ‘Intermediate Run’ model, an increase in the technology parameter (At) will lead to increased employment, an expansion of output, and an increase in the real interest rate.”
- “In the ‘Intermediate Run’ model, an increase in government expenditures will lead to a permanent expansion in output.”
- “Ricardian Equivalence suggests that households can infer an increase in federal government spending that is financed by borrowing will not lead to a future increase in their tax liabilities.
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ISBN: 978-0132971324
6th edition
Authors: Courtland L. Bovee, John V. Thill
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