Suppose we assume that initially $\bar { a } = 0 , \bar { b } = 1 , R _ { t } = \bar { r } = 5 \%$ if $\bar { a } _ { c }$ rises 2 percent and the real interest rate rises 2 percent, short-run output rises 2 percent.

Question

Suppose we assume that initially $\bar { a } = 0 , \bar { b } = 1 , R _ { t } = \bar { r } = 5 \%$  if $\bar { a } _ { c }$  rises 2 percent and the real interest rate rises 2 percent, short-run output rises 2 percent.

Quizplus · Accepted Answer

The statement is false because an increase in the real interest rate typically leads to a decrease in short-run output, not an increase.

Suppose We Assume That Initially aˉ=0,bˉ=1,Rt=rˉ=5%\bar { a } = 0 , \bar { b } = 1 , R _ { t } = \bar { r } = 5 \%aˉ=0,bˉ=1,Rt​=rˉ=5%

Suppose We Assume That Initially $\bar { a } = 0 , \bar { b } = 1 , R _ { t } = \bar { r } = 5 \%$