Consider the three types of economic shocks: financial shocks, spending shocks, and supply shocks. Indicate how each affects the real interest rate, the output gap, and the inflation rate. a. A financial shock will change the real interest rate, which affects the output gap and hence the inflation rate. not affect the real interest rate but will affect the output gap and hence the inflation rate. not affect either the real interest rate or the output gap but will change the inflation rate. change the real interest rate and hence the output gap but not the inflation rate. b. A spending shock will change the real interest rate, which affects the output gap and hence the inflation rate. not affect either the real interest rate or the output gap but will change the inflation rate. not affect the real interest rate but will affect the output gap and hence the inflation rate. change the real interest rate and hence the output gap but not the inflation rate. c. A supply shock will change the real interest rate and hence the output gap but not the inflation rate. not affect the real interest rate but will affect the output gap and hence the inflation rate. change the real interest rate, which affects the output gap and hence the inflation rate. not affect either the real interest rate or the output gap but will change the inflation rate.

Question

24-04-2021
Business

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Consider the three types of economic shocks: financial shocks, spending shocks, and supply shocks. Indicate how each affects the real interest rate, the output gap, and the inflation rate. a. A financial shock will change the real interest rate, which affects the output gap and hence the inflation rate. not affect the real interest rate but will affect the output gap and hence the inflation rate. not affect either the real interest rate or the output gap but will change the inflation rate. change the real interest rate and hence the output gap but not the inflation rate. b. A spending shock will change the real interest rate, which affects the output gap and hence the inflation rate. not affect either the real interest rate or the output gap but will change the inflation rate. not affect the real interest rate but will affect the output gap and hence the inflation rate. change the real interest rate and hence the output gap but not the inflation rate. c. A supply shock will change the real interest rate and hence the output gap but not the inflation rate. not affect the real interest rate but will affect the output gap and hence the inflation rate. change the real interest rate, which affects the output gap and hence the inflation rate. not affect either the real interest rate or the output gap but will change the inflation rate.

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Harrisonjob Harrisonjob · Answer 1 · 2021-04-25T12:51:28+02:00

Answer:

a. A financial shock will change the real interest rate, which affects the output gap and hence the inflation rate. not affect the real interest rate but will affect the output gap and hence the inflation rate. not affect either the real interest rate or the output gap but will change the inflation rate. change the real interest rate and hence the output gap but not the inflation rate.

Explanation:

The above is actually how the financial shocks, spending shocks and supply shocks has an effect on the indices of economy which include the real interest rate, output gap and inflation rate.