Using the exercise in the book and that you saw in class, answer the following question about the is curve suppose the parameters of the is curve are 2-0, b=3/4, and r = 2% (where the lower bar coefficients represent the upper bar coefficients, according to class and book notation). suppose further that initially the real interest rate r-2%. explain what happens to short-run output (sro) if: the real interest rate falls from 2% to 1%. sro will increase by 0.75%. sro will decrease by 0.75%. sro will remain constant. sro will increase by 1.5%.

answer; false pretense;

answer; lags, push the econ below the natural level of output;

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.