In an economy where planned aggregate spending is given by PAE = 5,500 + 0.6Y – 20,000r, the central bank is currently setting the interest rate at 0.05 (5 per cent). If potential output equals 11,750, the central bank must ____ the interest rate to close the ____________ gap.Group of answer choiceslower; expansionaryraise; expansionaryraise; contractionarylower; recessionarynot change; output

If planned aggregate expenditure (PAE) in an economy equals 2000 + 0.8Y and potential output (Y*) equals 9000, then this economy has:Group of answer choicesa recessionary gap.an expansionary gap.no induced expenditure.no autonomous expenditure.No output gap.

If potential output equals 10200 and short-run equilibrium output equals 9700,there is a(n) gap and the Reserve Bank must_____real interest rates in order to close the gap. ○expansionary;:raise O contractionary;raise O expansionary;lower O expansionary;not change O contractionary;lower

Suppose the public only hold currency (i.e. there are no banks). The demand for money is given by Money demand = $Y(0.4 - i)The nominal income is $100 and interest rate is held fixed by the central bank at 10% (or 0.1). Starting from the initial equilibrium suppose nominal income increases to $125. The increase in income will require the central bank to increase the supply of money from ________ to ________ .Group of answer choices100; 125300; 37530; 37.540; 50

Use the rule-of-thumb to predict how the Central Bank would want to change its funds rateand the real interest rate targets for each of the following scenarios if its estimate of theneutral real interest rate is 2%.a. A recession hits the economy leading output to be 0.75% below potential output andinflation to fall to 1%.b. An increase in consumer and business confidence pushes the economy to producingoutput at 2% above potential output while inflation rises to 3.5%c. Show the effect of b) in an AD-AS diagram

Faced with inflationary pressure, the central bank of country A implemented a contractionary monetary policy and increased its policy interest rate by 1% over 6 months. This resulted in a change of ____ (%) in equilibrium output. (2 points)