According to the Keynesian IS-LM model, what is the effect of each of the following on output, the real interest rate, employment, and the price level? Distinguish between the short run and the long run.(a)Expected inflation decreases.(b)Labor supply increases due to a change in demographics.(c)The future marginal product of capital increases.
What will be an ideal response?
| (a) | Short run: Y and N decrease; r rises; P is unchanged. Long run: P falls; Y, r, and N are |
| (b) | Nothing happens to any of the variables. |
| (c) | Short run: Y, r, and N rise; P is unchanged. Long run: r and P rise; Y and N are unchanged. |
Economics
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Which of the following will happen if the GDP of a country increases and the population remains constant?
A) Income per capita will remain constant. B) Income per capita will increase. C) Unemployment rate will increase. D) Gross national product will decrease.
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If real GDP grows by 3 percent, the velocity of circulation does not change, and the quantity of money grows by 5 percent, then in the long run the inflation rate is
A) 8 percent. B) -5 percent. C) 2 percent. D) 3 percent. E) -2 percent.
Economics