ps11 - (ii the central bank attempts to maintain a constant...

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ECON 205: PRINCIPLES OF MACROECONOMICS FALL 2008 MARK MOORE PROBLEM SET 11 1. Baumol and Blinder, ch. 15, Test Yourself, problem 2. 2. Baumol and Blinder, ch. 15, Test Yourself, problem 3. 3. Baumol and Blinder, ch. 15, Discussion Questions, problem 2. 4. Baumol and Blinder, ch. 15, Discussion Questions, problem 4. 5. Suppose the government spending on goods and services (G) increases. Compare the effects on the AD curve, output, the interest rate, and the money supply under the following scenarios: (i) the central bank attempts to maintain a constant money supply;
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Unformatted text preview: (ii) the central bank attempts to maintain a constant level of output; or (iii) the central bank attempts to maintain a constant interest rate. 6. (i) Suppose there is permanent increase in G or a permanent reduction in T. What happens to the real interest rate in the long run? (ii) Suppose there is a permanent increase in the growth rate of money. What tends to happen to the nominal interest rate in the short run? What tends to happen to the nominal interest rate in the long run?...
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