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Unformatted text preview: 2. a. Equilibrium income = 80 Trade surplus = -6. b. 2. [1/(1-.5)] c. Trade surplus = 0. New equil. Income = 100. New M = 20. 3. A. AD shifts left. Output and prices decrease. In the long run, SRAS will shift to the right to restore output to its original level (at full employment level of output) and prices will drop further. B. When interest rates increase, the price of the bond will decrease. Use the present value equation. The present value of the bond is its present value....
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This note was uploaded on 09/25/2011 for the course ECN 001B taught by Professor Staff during the Fall '09 term at UC Davis.
- Fall '09