Consider Two Economies with the Following IS Curves,denoted 1 and 2

question 55

Multiple Choice

Consider two economies with the following IS curves,denoted 1 and 2:
IS1:
IS2:
Given these two curves,the economies are identical except that they respond to interest rate changes differently.Suppose we assume
,b±1 = 1,
,
) If the real interest rate in each economy falls to
,then:

• A)Country 1 will move from its long-run equilibrium to 1 percent above its potential and Country 2 will move from its long-run equilibrium to 0.5 percent above its potential.
• B)Country 1 will move from its long-run equilibrium to 1 percent above its potential and Country 2 will move from its long-run equilibrium to -0.5 percent below its potential.
• C)Country 1 will move from its long-run equilibrium to -1 percent below its potential and Country 2 will move from its long-run equilibrium to 0.5 percent above its potential.
• D)Country 1 will move from 0.5 percent below its potential to its long-run equilibrium and Country 2 will move from its long-run equilibrium to 2 percent above its potential.
• E)Neither country will move away from its long-run equilibrium.

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Definitions:

Power Stroke

The phase in muscle contraction where the myosin head pivots, pulling the actin filament towards the center of the sarcomere, shortening the muscle.

Sarcoplasmic Reticulum

A specialized type of smooth endoplasmic reticulum found in muscle cells, where it stores and releases calcium ions to trigger muscle contraction.

Myoglobin Content

The amount of myoglobin, a protein in muscle cells that binds oxygen, present within muscle tissues.

Treppe

A phenomenon where muscle contractions become more forceful with successive stimulations, without any change in the stimulation strength.