11-1.
a. The current equilibrium interest rate- Each dollar save will increase at any given interest rate, so the desired saving curve as an upward-sloping supply will shift rightward. Eventually, this will cause the equilibrium interest rate to decline.
b. Current equilibrium real GDP- There is no effect on current equilibrium real GDP because people are saving now to invest in the future and in the classical model the vertical LRAS always applies.
c. Current equilibrium Employment- There is not effect on the current equilibrium employment because a change in the saving due to the interest rate does not directly affect the demand for labor or the supply of labor in the classical model.
d. Current equilibrium investment- …show more content…
Future equilibrium real GDP- If there is an increase in current investment, it will contribute to an addition to the nation’s capital stock or capital accumulation. This will indicate an increase in future productions and higher equilibrium real GDP in the future.
11-3. “There is absolutely no distinction between the classical model and Chapter 10’s model of long-run equilibrium.” Is this statement true or …show more content…
That eventually will lead to a new short-run equilibrium at E2. The equilibrium prices level will fall as other things being equaled the short-run equilibrium level of real GDP per year will fall too. The short-run outcome will rise in the unemployment rate causing the LRAS to be stable of real GDP per year. A recessionary gap will occur due to the shift in AD and a short run reduction of equilibrium different from the LRAS at E1. It 's the difference between the short-run equilibrium level of real GDP at less than the real GDP of full employment on
a. The current equilibrium interest rate- Each dollar save will increase at any given interest rate, so the desired saving curve as an upward-sloping supply will shift rightward. Eventually, this will cause the equilibrium interest rate to decline.
b. Current equilibrium real GDP- There is no effect on current equilibrium real GDP because people are saving now to invest in the future and in the classical model the vertical LRAS always applies.
c. Current equilibrium Employment- There is not effect on the current equilibrium employment because a change in the saving due to the interest rate does not directly affect the demand for labor or the supply of labor in the classical model.
d. Current equilibrium investment- …show more content…
Future equilibrium real GDP- If there is an increase in current investment, it will contribute to an addition to the nation’s capital stock or capital accumulation. This will indicate an increase in future productions and higher equilibrium real GDP in the future.
11-3. “There is absolutely no distinction between the classical model and Chapter 10’s model of long-run equilibrium.” Is this statement true or …show more content…
That eventually will lead to a new short-run equilibrium at E2. The equilibrium prices level will fall as other things being equaled the short-run equilibrium level of real GDP per year will fall too. The short-run outcome will rise in the unemployment rate causing the LRAS to be stable of real GDP per year. A recessionary gap will occur due to the shift in AD and a short run reduction of equilibrium different from the LRAS at E1. It 's the difference between the short-run equilibrium level of real GDP at less than the real GDP of full employment on