In Some Sophisticated Macroeconomic Models, If Monetary Policy Is Used

question 11

Multiple Choice

In some sophisticated macroeconomic models, if monetary policy is used to combat recession, the real interest rate _____, whereas the real interest rate ______if fiscal policy is used.

• A)increases; decreases
• B)decreases; increases
• C)remains unchanged; increases
• D)decreases; remains unchanged

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Definitions:

Labor-Augmenting

Technological improvements or changes that increase the efficiency or productivity of labor.

Marginal Productivity

The additional output resulting from the employment of one more unit of a factor of production, holding all other inputs constant.

Labor Supply Curves

The graphical representation of the relationship between the labor provided by employees and the wage rate.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.