Assume the economy is in equilibrium where real GDP equals potential GDP, and the economy experiences a negative demand shock
Describe what happens in the IS-MP model, and explain what policy the Fed could use to keep the inflation rate from changing?
The negative demand shock shifts the IS curve to the left, decreasing the inflation rate. The Fed would respond by decreasing the real interest rate, shifting the MP curve down, which raises the inflation rate.
Economics
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Which of the following statements is true?
A) Social planners are only concerned with efficiency and not equity. B) Social planners are only concerned with equity and not efficiency. C) To some, efficiency means an even distribution of goods across society. D) To some, equity means an even distribution of goods across society.
Economics
What is mechanism design? Give at least two examples
What will be an ideal response?
Economics