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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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This note was uploaded on 06/17/2009 for the course ECON 20091_ECO taught by Professor Mohammadsafarzadeh during the Fall '09 term at USC.
- Fall '09