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Unformatted text preview: income, real interest rate, and investment. 3. In the following diagram the economy can move to full employment (Ybar) by an expansion in either money or deficit. Which policy leads to E1 and which to E2? How would you expect the choice to be made? Who would strongly favor moving E1 versus E2? Output, Y Real interest rate, r FE IS LM Y E1 E2 E Y0 4. An increase in government spending always leads to a move toward current account deficit in a small open economy. True/False. Explain....
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This note was uploaded on 10/12/2009 for the course ECON 291 taught by Professor J liu during the Spring '07 term at Simon Fraser.
- Spring '07
- J Liu