Let the IS curve for the U.S. be such that Ỹt =ā - b(Rt F). If the Fed increases the interest rate, then the effect would be captured as: The IS Curve Real interest rate, R IS Output, Y O A movement along the IS curve towards a lower Ỹ. An increase in ā, tilting the curve around (0,7). An increase in the IS multiplier. O An increase in ā, moving the curve up. Question 7 If the Ricardian Equivalence holds - Increasing government purchases wouldn't generate a positive demand shock (a=0), if it is financed by increasing either current taxes or future taxes. O Increasing government purchases would generate a positive demand shock (@ >0), if it is financed by increasing current taxes. O Increasing government purchases would generate a positive demand shock (LaTeX: \overline{a}>0), if it is financed by increasing future taxes. O Increasing government purchases would generate a negative demand shock ( ā<0), if it is financed by increasing future taxes. O Increasing government purchases would generate a negative demand shock ( ā<0), if it is financed by increasing current taxes.

Let the IS curve for the U.S. be such that Ỹt =ā - b(Rt F). If the Fed increases the interest rate, then the effect would be captured as: The IS Curve Real interest rate, R IS Output, Y O A movement along the IS curve towards a lower Ỹ. An increase in ā, tilting the curve around (0,7). An increase in the IS multiplier. O An increase in ā, moving the curve up. Question 7 If the Ricardian Equivalence holds - Increasing government purchases wouldn't generate a positive demand shock (a=0), if it is financed by increasing either current taxes or future taxes. O Increasing government purchases would generate a positive demand shock (@ >0), if it is financed by increasing current taxes. O Increasing government purchases would generate a positive demand shock (LaTeX: \overline{a}>0), if it is financed by increasing future taxes. O Increasing government purchases would generate a negative demand shock ( ā<0), if it is financed by increasing future taxes. O Increasing government purchases would generate a negative demand shock ( ā<0), if it is financed by increasing current taxes.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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