Suppose We Assume That Initially $\bar { a } = 0 , \bar { b } = 0.5 , R _ { t } = \bar { r } = 5 \%;$

question 21

Multiple Choice

Suppose we assume that initially $\bar { a } = 0 , \bar { b } = 0.5 , R _ { t } = \bar { r } = 5 \%;$ if $\bar { a } _ { i m }$
Rises 2 percent and the real interest rate falls 4 percent, short-run output:

• A) rises 2 percent
• B) rises 6 percent
• C) falls 2 percent
• D) rises 4 percent
• E) does not change

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