HW10 - Homework 10-Intermediate Macroeconomics (Due on...

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Homework 10-Intermediate Macroeconomics (Due on 12/07/2010) I Multiple choices (24 points) Use the following to answer question 1: Exhibit: IS-LM Fiscal Policy 1. (Exhibit: Fiscal Policy) Based on the graph, starting from equilibrium at interest rate r 1 and income Y 1 , a decrease in government spending would generate the new equilibrium combination of interest rate and income: A) 2 , 2 B) 3 , 2 C) 2 , 3 D) 3 , 3 2. In the model when M remains constant but P rises, in short-run equilibrium, in the usual case, the interest rate ______ and output ______. A) rises; falls B) rises; rises C) falls; rises D) falls; falls Page 1
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Use the following to answer question 3: Exhibit: Policy Interaction 3. (Exhibit: Policy Interaction) Based on the graph, starting from equilibrium at interest rate r 3 , income Y 2 , IS 1 , and LM 1 , if there is an increase in government spending that shifts the curve to 2 , then in order to keep the interest rate constant the Federal Reserve should ______ the money supply shifting to ______.
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This note was uploaded on 02/02/2011 for the course ECO 305 taught by Professor Kisina during the Fall '08 term at SUNY Stony Brook.

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HW10 - Homework 10-Intermediate Macroeconomics (Due on...

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