When the central bank pursues contractionary monetary policy, we that this policy will result in an increase in the interest rate, a reduction in investment, a reduction in demand, and a lower level of equilibrium output. Explain what happens to the position of the IS curve as the central bank pursues contractionary monetary policy
What will be an ideal response?
Changes in the interest rate do cause changes in investment, demand, and output. However, they do not cause shifts of the IS curve. Changes in the interest rate cause movements along the IS curve.
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An increase in the capital stock shifts
a) short-run aggregate-supply curve to the left and long-run aggregate-supply curve to the right. b) short-run aggregate-supply curve to the right but does not shift long-run aggregate-supply curve. c) long-run aggregate-supply curve to the right but does not shift short-run aggregate-supply curve. d) both short-run and long-run aggregate-supply curve to the right.
According to the Application, people in Morocco bring meteorites picked up in the desert to local dealers, who then sell them to the public through Websites. This process is a description of
A) a market system. B) a bureaucratic system. C) a barter economy. D) a centrally planned economy.