Question

1.) Money’s real value will change based on inflation. High inflation will _____ the real value. As a result of the change in the real value of money short-run equilibrium output will _____.

reduce; increase

increase; decrease

reduce; decrease

increase; increase

2.) Planned aggregate expenditures need to change by $300 billion. The mpc = 0.60. A Keynesian economist would say government spending needs to change by ______ OR taxes need to change by _______.

	$20.5 billion; $20.5 billion
	$300 billion; more than $300 billion
	more than $20.5 billion; less than $20.5 billion
	more than $300 billion; less than $300 billion

3.)

According to the Taylor rule, the Federal Reserve lowers the real interest rate as the output gap _____ or the inflation rate _____.

	increases; increases
	increases; decreases
	decreases; increases
	decreases; decreases

Answer 1

Answer 1: Option C is correct. Money real value will change based on inflation.Higher inflation will reduce the real value.As a result of change in real value of money short run. Equilibrium level of output decreases. It means that reduction in the real value of money in an economy.

Answer 2: Option D is correct. Planned aggregate expenditure need to be change by $300 billion. The MPC =0.60. so the

Keynesian economic said that change in government spending is more than $300 million or change in taxes less than $300 billion in an economy.

Answer 3:; Option D is correct. According to Taylor's rule, the federal reserve lowers the real interest rate as output gap decreases or inflation level decreases. These all things put economy to grow the interest rate has been reduced.