Use the IS-LM model to predict the short-run effects of each of the following shocks on...
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Use the IS-LM model to predict the short-run effects of each of the following shocks on income, the real interest rate, consumption, and investment. In each case, explain what the Fed should do to keep income at its initial level. a. After the invention of a new high-speed computer chip, many firms decide to upgrade their computer systems. b. A wave of credit card fraud increases the frequency with which people make transactions with cash. c. A best-seller titled "Retire Rich" convinces the public to increase the percentage of their income devoted to savings. d. The appointment of a new Fed chairman increases expected inflation. Use the IS-LM model to predict the short-run effects of each of the following shocks on income, the real interest rate, consumption, and investment. In each case, explain what the Fed should do to keep income at its initial level. a. After the invention of a new high-speed computer chip, many firms decide to upgrade their computer systems. b. A wave of credit card fraud increases the frequency with which people make transactions with cash. c. A best-seller titled "Retire Rich" convinces the public to increase the percentage of their income devoted to savings. d. The appointment of a new Fed chairman increases expected inflation.
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The ISLM model appears as a graph that shows the intersection of goods and the money market The IS s... View the full answer
Related Book For
Macroeconomics
ISBN: 978-1464168505
5th Canadian Edition
Authors: N. Gregory Mankiw, William M. Scarth
Posted Date:
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