Question: Intermediate Macro Question, looking for any advice on how to answer it. Thank you. Nominal interest rates are typically pro-cyclical, that is they rise when

Intermediate Macro Question, looking for any advice on how to answer it. Thank you.

Nominal interest rates are typically pro-cyclical, that is they rise when output rises above potential and fall when output falls below potential. Using the short run model we have studied this term, explain all the reasons why nominal interest rates are pro-cyclical, that is, explain why nominal interest rates rise when output rises above potential output and why nominal interest rates fall when output falls potential output. Your answer should include any and all appropriate mathematics, graphs and words
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
