The nominal interest rate in Autarkia has risen sharply after a change in a government policy. How will this affect the economy if the wages in the country are downwardly rigid?
What will be an ideal response?
If the nominal interest rate in Autarkia rises sharply after a change in government policy, both consumption and investment will fall. As a result, labor demand will fall. If wages are downwardly rigid, this will lead to a large increase in unemployment. As more workers become unemployed, the number of mortgage defaults, household bankruptcies, and firm bankruptcies will increase. This, in turn, further reduces consumption and investment.
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A decrease in the price of GPS systems will result in
A) a larger quantity of GPS systems supplied. B) a decrease in the demand for GPS systems. C) a smaller quantity of GPS systems supplied. D) an increase in the supply of GPS systems.
According to quantitative estimates of the burden of the Navigation Acts on the colonies, what can be said about the (net) effect of the Acts?
a. The Navigation Acts placed a serious economic burden on the colonies, with estimates of this burden equaling roughly 40 percent of 1770s GNP. b. The Navigation Acts were the critical reason why colonists revolted against the British. c. After accounting for the protection provided by the British, there was very little economic burden to colonists from the Navigation Acts. d. Existing data do not allow for credible estimates of the economic burden of the Navigation Acts on the colonies.