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FA25 ECON 302 002 Final Exam

Numerical

Consider the IS curve ๐‘Œ ~ ๐‘ก = ๐‘Ž ยฏ โˆ’ ๐‘ ยฏ ( ๐‘… ๐‘ก โˆ’ ๐‘Ÿ ยฏ ) + ๐‘ฅ ยฏ ๐‘Œ ~ ๐‘ก , where ๐‘ ยฏ = 1 , ๐‘ฅ ยฏ = 1 / 4 , and ๐‘… ๐‘ก โˆ’ ๐‘Ÿ ยฏ = 0.03 . If there is a positive demand shock where the economy goes from ๐‘Ž ยฏ = 0 to ๐‘Ž ยฏ = 0.05 , then short-run output changes by ______ percentage points (enter a negative number for a fall in short-run output and a positive number for a rise in short-run output). Round your answer to the nearest tenth of a percent.

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We are given the IS curve in the form: ลถ_t = รขฬ„ โˆ’ bฬ„(แน˜_t โˆ’ rฬ„) + xฬ„ ลถ_t, with bฬ„ = 1, xฬ„ = 1/4, and แน˜_t โˆ’ rฬ„ = 0.03. First, rearrange the IS equation to solve for ลถ_t in terms of the exogenous variables: ลถ_t โˆ’ xฬ„ ลถ_t = รขฬ„ โˆ’ bฬ„(แน˜_t โˆ’ r......Login to view full explanation

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Using the IS curve ๐‘Œ ~ ๐‘ก = ๐‘Ž ยฏ โˆ’ ๐‘ ยฏ ( ๐‘… ๐‘ก โˆ’ ๐‘Ÿ ยฏ ) , in the long run,ย  ๐‘Ž ยฏ [ Select ] equals 0 equals 1 and ๐‘… ๐‘ก [ Select ] > < = ๐‘Ÿ ยฏ , so that [ Select ] the economy's actual output equals potential output. the economy is in a boom the economy is in a recession .

Consider an economy with the following IS curve: ๐ผ ๐‘† : ๐‘Œ ~ ๐‘ก = ๐‘Ž ยฏ โˆ’ ๐‘ ยฏ ( ๐‘… ๐‘ก โˆ’ ๐‘Ÿ ยฏ ) ย  Suppose we assume ๐‘Ž ยฏ = 0.03 , ๐‘ ยฏ = 1 , ๐‘… ๐‘ก = ๐‘Ÿ ยฏ = 0.045 .ย Let ฮ” ๐‘Œ ~ ๐‘ก = ๐‘Œ ~ ๐‘ก โˆ’ ๐‘Œ ~ ๐‘ก โ€ฒ , where ๐‘Œ ~ ๐‘ก is short-run output when the real interest rate equals ๐‘… ๐‘ก and ๐‘Œ ~ ๐‘ก โ€ฒ is short-run output when the real interest rate equals ๐‘… ๐‘ก โ€ฒ . If the real interest rate falls from ๐‘… ๐‘ก to ๐‘… ๐‘ก โ€ฒ = 0.02 , then ฮ” ๐‘Œ ~ ๐‘ก = ______ percent. Round your answer to the nearest tenth of a percent.

Consider the IS curve ๐‘Œ ~ ๐‘ก = ๐‘Ž ยฏ โˆ’ ๐‘ ยฏ ( ๐‘… ๐‘ก โˆ’ ๐‘Ÿ ยฏ ) + ๐‘ฅ ยฏ ๐‘Œ ~ ๐‘ก , where ๐‘ ยฏ = 1 , ๐‘ฅ ยฏ = 1 / 4 , and ๐‘… ๐‘ก โˆ’ ๐‘Ÿ ยฏ = 0 . If there is no demand shock, i.e. ๐‘Ž ยฏ = 0 , and the real interest rate increases by 1ย percentage points, then short-run output changes by ______ percentage points (enter a negative number for a fall in short-run output and a positive number for a rise in short-run output). Round your answer to the nearest tenth of a percent.

Consider an economy with the following IS curve: ๐ผ ๐‘† : ๐‘Œ ~ ๐‘ก = ๐‘Ž ยฏ โˆ’ ๐‘ ยฏ ( ๐‘… ๐‘ก โˆ’ ๐‘Ÿ ยฏ ) ย  Suppose we assume ๐‘Ž ยฏ = โˆ’ 0.02 , ๐‘ ยฏ = 1 , ๐‘… ๐‘ก = ๐‘Ÿ ยฏ = 0.06 . Let ฮ” ๐‘Œ ~ ๐‘ก = ๐‘Œ ~ ๐‘ก โ€ฒ โˆ’ ๐‘Œ ~ ๐‘ก , where ๐‘Œ ~ ๐‘ก is short-run output when the real interest rate equals ๐‘… ๐‘ก and ๐‘Œ ~ ๐‘ก โ€ฒ is short-run output when the real interest rate equals ๐‘… ๐‘ก โ€ฒ . If the real interest rate falls from ๐‘… ๐‘ก to ๐‘… ๐‘ก โ€ฒ = 0.04 , then ฮ” ๐‘Œ ~ ๐‘ก = ______ percent. Round your answer to the nearest tenth of a percent.

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