Identify changes in three variables that would cause the FE line to shift to the right
What will be an ideal response?
An increase in productivity, an increase in the supply of capital, or an increase in the supply of labor would increase the full-employment level of output, as illustrated by a rightward shift in the FE line.
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According to real business cycle models
A) the economy is normally operating below the natural rate of unemployment. B) unexpected changes in monetary policy are the major source of fluctuations in real GDP. C) the economy is normally at potential GDP. D) the long-run Phillips curve is negatively sloped.
According to liquidity preference theory, an increase in the price level would ________
A) increase the demand for real money balances B) decrease the supply of real money balances C) decrease the real interest rate D) all of the above E) none of the above