Using the IS curve $\tilde { Y } _ { t } = \bar { a } - \bar { b } \left( R _ { t } - \bar { r } \right)$ , in the long run, $\bar { a }$
________ and ________, so that ________.
A) equals one; $R _ { t } = \bar { r }$ ; the economy is in recession
B) is greater than one; $R _ { t } \bar { r }$ ; the economy is at its long-run equilibrium
C) equals zero; $R _ { t } = \bar { r }$ ; the economy is at its long-run equilibrium
D) equals one; $\bar { b } = \bar { a }$ ; the economy is expanding
E) equals one; $R _ { t } = 1$ ; the economy is in recession

Question

Using the IS curve $\tilde { Y } _ { t } = \bar { a } - \bar { b } \left( R _ { t } - \bar { r } \right)$ , in the long run, $\bar { a }$
________ and ________, so that ________.
A) equals one; $R _ { t } = \bar { r }$ ; the economy is in recession
B) is greater than one; $R _ { t } > \bar { r }$ ; the economy is at its long-run equilibrium
C) equals zero; $R _ { t } = \bar { r }$ ; the economy is at its long-run equilibrium
D) equals one; $\bar { b } = \bar { a }$ ; the economy is expanding
E) equals one; $R _ { t } = 1$ ; the economy is in recession

Quizplus · Accepted Answer

In the long run, $\bar { a }$ equals zero and $R _ { t } = \bar { r }$, indicating that the economy is at its long-run equilibrium with no output gap.

Using the IS Curve Y~t=aˉ−bˉ(Rt−rˉ)\tilde { Y } _ { t } = \bar { a } - \bar { b } \left( R _ { t } - \bar { r } \right)Y~t​=aˉ−bˉ(Rt​−rˉ)

Using the IS Curve $\tilde { Y } _ { t } = \bar { a } - \bar { b } \left( R _ { t } - \bar { r } \right)$