QTR 3 Test Corrections - Nick Kemp Mr McGrain AP Macro Pd 7 4 April 2016 Test Corrections Unit 5 Stabilization Policy Short answer Incorrect Answer I

QTR 3 Test Corrections - Nick Kemp Mr McGrain AP Macro Pd 7...

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Nick Kemp Mr. McGrain AP Macro, Pd. 7 4 April 2016 Test Corrections Unit 5 Stabilization Policy Short answer Incorrect Answer: I shifted the demand in my answer and i said that the government will be making less money in taxes which will decrease the quantity of loanable funds and lower the real interest rate 3. Which of the following statements is true? 1. In the LR, real interest rates are unaffected by inflationary expectations 2. IN the Lr, monetary and fiscal policy have no effect on real output 3. Real interest rates do not change in the long run Incorrect answer: C. II only Swabia Loanable Funds Model Real Interest Rate Slf Slf 2 Dlf Qlf For the Short answer problem I want wrong because i shifted the demand to the right because i thought a lower tax rate would lead to more investment for businesses and consumer spending. When in reality the Supply shifts increasing the quantity of loanable funds and lowering the real interest rate. This shift is going increase the quantity which means more investment. This makes sense with a lower tax on stock and bond gains.
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