If the IS Curve Is Relatively Steep, Then

question 7

Multiple Choice

If the IS curve is relatively steep, then:

• A) there can be no long- run tradeoff between inflation and unemployment.
• B) monetary policy cannot be very effective in changing GDP.
• C) budget deficits will not affect future capital accumulation.
• D) Ricardian equivalence most likely holds.
• E) rational expectations theory is probably correct.

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Definitions:

Regression Trend Line

A line on a scatter plot, derived from regression analysis, that shows the main trend of the relationship between two variables.

Mean Absolute Deviation

Mean absolute deviation is a measure of variability that represents the average absolute difference between each data point and the mean of the data set.

Sum of Squares

A statistical measure that quantifies the variance within a dataset by summing the squared differences between each value and the mean.

Forecast Accuracy

The degree to which forecasted values correspond with actual values over a specified period.