Author Question: In a two-period model, as long as wealth effects are small, an increase in the world real interest ... (Read 70 times)

mydiamond · **on:** Jun 30, 2018

In a two-period model, as long as wealth effects are small, an increase in the world real interest rate

A) increases consumption and increases the current account surplus.
B) increases consumption and decreases the current account surplus.
C) decreases consumption and increases the current account surplus.
D) decreases consumption and decreases the current account surplus.

Question 2

Before the financial crisis of 2007, inflation was on the rise. According to the MP curve, this would lead to ________.

A) an increase in the real interest rate
B) an upward shift of the MP curve, if policymakers opted for autonomous tightening
C) a decrease in aggregate output
D) all of the above
E) none of the above