A short-run open-economy model with demand shocks can analyze the effect on _____ if output prices and factor prices are sticky.
A) inflation
B) real economic activity (real GDP and unemployment)
C) long-run variables
D) expectations
Ans: B) real economic activity (real GDP and unemployment)
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The Taylor rule specifies
a. a constant relationship between interest rates and output. b. a constant relationship between interest rates, output, and inflation. c. a flexible relationship between interest rates, output, and inflation. d. a fixed relationship between inflation and output. e. none of the above.
An increase in the rate of interest, other things being equal, will cause a(n):
a. downward shift in the investment demand curve. b. movement downward along the investment demand curve. c. movement upward along the investment demand curve. d. upward shift in the investment demand curve.