f01_ps8

f01_ps8 - 14.02 Fall 2001 Problem Set 8 Posted November 14,...

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14.02 Fall 2001 Problem Set 8 Posted November 14, 2001 Due November 28, 2001 I. True/False/Uncertain (explain) (30 points, 5 each) 1. Assume that the economy is initially operating at the natural level of output and that the expected price in period t is based on the following: P e t = P t 1 . Based on the AS-AD model, we know that a reduction in the price of oil will cause a reduction in the interest rate in the medium run . 2. Assume that the economy is initially operating at the natural level of output and that the expected price in period t is based on the following: P e t = P t 1 . Ba sedontheAS -ADmode l ,w eknowtha ta simultaneous reduction in government spending and increase in the money supply will cause a reduction in the interest rate in the medium run . 3. As product markets become
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f01_ps8 - 14.02 Fall 2001 Problem Set 8 Posted November 14,...

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