Multiple Choice
Suppose that the Federal Reserve has decided that there is a deflationary gap of $1 trillion in the economy. Suppose further that the estimated slope of the IS curve is -$400 billion. By how many percentage points would the Fed need to decrease the real interest rate in order close the deflationary gap?
A) 2.5
B) 4
C) .4
D) 25
Correct Answer:
Verified
Correct Answer:
Verified
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