Suppose we assume
,
,
,and the real interest rate falls to
)The economy would:
A)remain at its long-run equilibrium.
B)move from its long-run equilibrium to 1 percent below its potential.
C)move from 1 percent below its potential to its longrun equilibrium.
D)move from its long-run equilibrium to 1 percent above its potential.
E)none of the above

Question

Suppose we assume 
, 
, 
,and the real interest rate falls to 
)The economy would:
A)remain at its long-run equilibrium. 
B)move from its long-run equilibrium to 1 percent below its potential. 
C)move from 1 percent below its potential to its longrun equilibrium. 
D)move from its long-run equilibrium to 1 percent above its potential. 
E)none of the above

Quizplus · Accepted Answer

The Answer of Suppose we assume 
, 
, 
,and the real interest rate falls to 
)The economy would:
A)remain at its long-run equilibrium. 
B)move from its long-run equilibrium to 1 percent below its potential. 
C)move from 1 percent below its potential to its longrun equilibrium. 
D)move from its long-run equilibrium to 1 percent above its potential. 
E)none of the above

Suppose We Assume