(SOLVED) A permanent increase in government purchases

has a larger effect

A permanent increase in government purchases has a larger effect “A permanent increase in
government purchases has a larger effect than a temporary increase of the same amount.” Use
the saving-investment diagram to evaluate this statement, focusing on effects on consumption,
investment, and the real interest rate for a fixed […]

Display as a bar chart the periods since 1854 that are designated as U.S. recessions by the
National Bureau of Economic Research (FRED code: USREC). Why has the frequency of
recessions declined over time? Could improvements in monetary policy have played a role?
Improvements in fiscal policy? Can you think […]

A country loses much of its capital stock to a A country loses much of its capital stock to a war.
a. What effects should this event have on the country’s current employment, output, and real
wage? b. What effect will the loss of capital have on desired investment? c. […]

Changes in oil prices shift the short-run aggregate supply (SRAS) curve. Consider how volatility
in oil prices may influence the economy’s short-run equilibrium, which occurs at the intersection
of the dynamic aggregate demand (AD) curve and the SRAS curve. (a) Suppose the monetary
policy reaction curve is relatively steep. What […]

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*Monetary policymakers observe an increase in output in the economy and believe it is a result
of an increase in potential output. If they were correct, what would the appropriate policy
response be to maintain the existing inflation target? If they were incorrect and the increase in
output resulted simply […]

*Suppose a natural disaster reduces the productive capacity of the economy. How would the
equilibrium long-run real interest rate be affected? Assuming the central bank maintains its
existing inflation target, illustrate the impact on the monetary policy reaction function and on
equilibrium inflation and output both in the short run […]

Explain why the saving curve slopes upward and the investment Explain why the saving curve
slopes upward and the investment curve slopes downward in the saving-investment diagram.
Give two examples of changes that would shift the saving curve to the right, and two examples
of changes that would shift the […]

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