Explain how an increase in real interest rates affects the components of aggregate expenditure.
Use the following data to calculate equilibrium real GDP: C = 0.75Y,I = $2 trillion,G = $1 trillion and NX = -$0.5 trillion.
What is the inflation gap? What is the output gap?
The MP curve represents
A) the Fed's monetary policy actions in setting a target for the federal funds rate.
B) the relationship between the money supply and the price level.
C) a relationship between the real interest rate and manufacturing production.
D) the relationship between real interest rates and potential GDP.