For Each of the Following Changes,what Happens to the Real

question 35

Essay

For each of the following changes,what happens to the real interest rate and output in the long run,after the price level has adjusted to restore general equilibrium? How would the results differ,if at all,between the classical and Keynesian model? Draw a diagram for each part to illustrate your result.
(a)Wealth rises.
(b)Money supply rises.
(c)The future marginal productivity of capital increases.
(d)Expected inflation declines.
(e)Future income declines.

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Definitions:

Sensory Adaptation

The phenomenon by which sensory receptors become less sensitive to constant stimuli over time, allowing organisms to adapt to their environments.

Nociceptors

Sensory receptors found throughout the body that respond to potentially harmful stimuli by sending signals to the brain, resulting in the perception of pain.

Neural Impulses

Electrical signals that transmit information along the neurons in the nervous system.

Harmful Stimulus

Any external factor that can cause damage or adverse reactions in an organism or environment.