AK_Chapter_15 - Chapter 15 SOLUTIONS TO TEXT PROBLEMS...

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Chapter 15 SOLUTIONS TO TEXT PROBLEMS: Questions for Review 1. higher price level => higher money demand => higher interest rate => reduced quantity of goods and services demanded. 2. Closed: money-supply curve to the left => higher interest rate => aggregate demand falls. Open: same as closed, then exchange rate appreciates => NX falls and AD curve shifts further to the left. . 3. The multiplier effect => more than $3 billion. The crowding-out effect: less than $3 billion. No change in an open economy with a flexible exchange rate. 4. AD falls. Bank of Canada should increase the money supply. Parliament might increase government purchases or reduce taxes. 5. E.g., tax system. Problems and Applications 1. a. supply shift out; demand no change; interest rate down. b. demand shift to the left; supply no change; interest rate down. c. demand shift to the right; supply no change; interest rate up. d.
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This note was uploaded on 06/27/2010 for the course ECONOMCIS Econ103 taught by Professor D.allen during the Winter '08 term at Simon Fraser.

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AK_Chapter_15 - Chapter 15 SOLUTIONS TO TEXT PROBLEMS...

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