+1-415-670-9189
info@expertsmind.com
Is the economy in its long-term equilibrium
Course:- Business Economics
Reference No.:- EM13891973




Assignment Help
Assignment Help >> Business Economics

Suppose the parameters of the IS curve are a ¯i = 0, b ¯ = 0.5, r ¯ = 3% and the real interest rate is initially R = 3%

(a) Is the economy in its long-term equilibrium? Explain.

(b) Suppose the real interest rate falls to 2 per- cent; what happens to the short-run equilib- rium, holding everything else constant?

(c) What happens to the short-run equilibrium if a ¯g falls 3 percent, holding everything else constant?

(d) What occurs if the marginal product of cap- ital rises to 5%? What would cause this to happen?




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
Suppose the cost function for your firm is: C = 10 +2Q + 5Q2. If the firm sells output in a perfectly competitive market and other firms in the industry sell output at a price
Explain, with the use of demand and supply diagrams, the impact on equilibrium price and quantity of membership to health clubs from the simultaneous impact of an effective ad
When it comes to vehicle performance, there is often a tradeoff between speed & acceleration and safety features (high performance sports cars often have fewer safety features
a. What is the expected interest rate for the junk bond investment? b. Which investment will you choose if your utility function is given by U = (M2) ? c. Which investment wil
Suppose a handbill publisher can buy a new duplicating machine for $2000 and the duplicator has a 1-year life. The machine is expected to contribute $2200 to the year’s net re
Suppose that the money demand function is (M/P)d = 800 - 50r, where r is interest rate in percent. The money supply M is 2,000 and the price level P is fixed at 5. a. Graph th
If the price of chocolate increases what would happen to the demand and supply curves of chocolate and therefore to the equilibrium price and quantity in the market for chocol
Using appropriate diagrams of wage and price setting and aggregate demand and aggregate supply, explain and discuss the effects of an increase in the price of oil, assuming th