f01_ps9ans1

f01_ps9ans1 - 14.02 Principles of Macroeconomics Problem...

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14.02 Principles of Macroeconomics Problem Set 9 - GROWTH Posted: Wednesday, November 28, 2001 Due: Monday, December 10, 2001 PART I (TRUE or FALSE) 1. FALSE. Although money is endogenous – and therefore interest rates are determined by the interest rate parity condition– an increase in Prices will bring about a real appreciation. This will cause a loss in competitiveness that will reduce demand shifting the IS to the left. I.e. the new output equilibrium will be smaller. 2. FALSE. It will cause an increase in today’s exchange rate (gain in competi- tiveness) that will shift aggregate demand to the right. 3. FALSE. It will increase interest rates and lower investment that will shift aggregate demand to the left. 4. FALSE. Under classical assumptions, an increase in A will decrease the natural rate of unemployment. 5. FALSE. The level of output will depend on savings rate (but not its rate of growth). 6. FALSE. Conditional convergence states that the rate of growth of output per
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f01_ps9ans1 - 14.02 Principles of Macroeconomics Problem...

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