Author Question: The single most important contributor to China's economic growth has been ________. A) ... (Read 46 times)

londonang · **on:** Jun 30, 2018

The single most important contributor to China's economic growth has been ________.

A) government-directed credit to key economic sectors
B) strong demand for China's exports
C) rapid improvements in worker productivity
D) a substantial increase in the utilization of labor and capital inputs

Question 2

Suppose the monetary policy curve is r = 5 + 0.8, and the current values for output and inflation are 16.8 and 2 percent, respectively. An increase in global resource prices pushes the inflation rate to 4 percent.

Policy makers estimate that the monetary policy in place, responding to 4 percent inflation, will bring output down to 13.6, a decline considered excessive. Instead, they implement an autonomous easing of monetary policy to lower output from 16.8 to 16. Assuming no change in the slope of the monetary policy curve, determine the new curve.

tkempin · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

D

Answer to Question 2

From the given monetary policy curve, the real interest rate was initially 6.6 percent, and would rise to 8.2 percent in response to the increase in inflation from 2 percent to 4 percent. Since this increase in the real interest rate would cause output to decline from 16.8 to 13.6, we know that the IS curve is Y = 30 - 2r. If output is to be 16, the real interest rate must be 7 percent. The monetary policy curve with slope 0.8 and coordinates 4, 7 is r = 3.8 + 0.8.