Which of the following scenarios best describes the short-run model?
A) $R _ { t } \uparrow \Rightarrow i _ { t } \uparrow \Rightarrow I _ { t } \downarrow \Rightarrow \tilde { Y } t \uparrow \Rightarrow \Delta \pi _ { t } \downarrow$
B) $i _ { t } \uparrow \Rightarrow R _ { t } \uparrow \Rightarrow I _ { t } \uparrow \Rightarrow \tilde { Y } t \uparrow \Rightarrow \Delta \pi _ { t } \uparrow$
C) $G _ { t } \uparrow \Rightarrow I _ { t } \downarrow \Rightarrow \tilde { Y } _ { t } \uparrow \Rightarrow \Delta \pi _ { t } \downarrow$
D) $\Delta \pi _ { t } \uparrow \Rightarrow \tilde { Y } _ { t } \uparrow \Rightarrow R _ { t } \downarrow \Rightarrow I _ { z } \downarrow$
E) None of these answers are correct.

Question

Quizplus · Accepted Answer

The short-run model typically involves changes in interest rates affecting investment and output, but none of the given scenarios accurately describe the typical short-run dynamics where an increase in interest rates leads to decreased investment and output, and potentially lower inflation.

Which of the Following Scenarios Best Describes the Short-Run Model