In the Keynesian model, suppose the Fed sets a target for the real interest rate
If the IS curve shifts down and to the left, and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run, what should the Fed do? Use the LR curve to formulate your answer.
Reduce the real interest rate by shifting the LR curve down.
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In an economy with no income taxes or imports, the expenditure multiplier is
A) greater than 1 only if the MPC is greater than 1. B) less than 1 only if the MPC is less than 1. C) equal to 1 if the MPC is greater than 1. D) greater than 1 if the MPC is less than 1. E) always less than 1 no matter what the size of the MPC.
You are given the following information on the banking system
Reserve requirement rr = 0.08 Currency-deposit ratio c = 0.10 Excess reserve ratio e = 0.05 Compute the simple deposit and money multipliers.