Describe how the real interest rate changes in a Keynesian model if a shock shifts the IS curve down and to the right and the Fed changes its policy to keep output unchanged.
What will be an ideal response?
If the Fed is going to keep output unchanged, then it will tighten monetary policy, reducing the money supply to offset the shift of the IS curve. The tighter monetary policy will mean that the real interest rate is higher. The LM curve shifts up and to the left, or the LR curve shifts up.
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How does the ECB choose to define price stability?
A) Eurozone consumer price inflation of less than but close to 2% per year over the medium term B) consumer price inflation of greater than but close to 3% per year over the medium term in all Eurozone countries C) Eurozone consumer price inflation equal to 0% per year over the medium term D) Eurozone consumer price inflation less than but close to 5% per year over the medium term
The 2011 U.S. distribution of income shows that the top 5 percent of families have approximately what share of income?
a. 4 percent b. 9 percent c. 21 percent d. 49 percent