Ejercicio 2 - Model IS-LM-PC: del curt al mig termini · Introducció a la Macroeconomia UPF 2024

e. Within the textbook IS-LM-PC model, which factor causes an increase in the natural level of output in the medium run?

Solución: 4. An increase in overall labor productivity.

f. Assume an economy sits in medium-run equilibrium ($Y = Y_n$). If public expenditure $G$ falls, how must the central bank adjust its real policy rate to return to medium-run equilibrium?

Solución: 2. The drop in G shifts IS left, moving Y below Y_n; to restore Y_n, the central bank must cut the real rate, shifting LM downward.

h. In an IS-LM-PC diagram where $Y_1$ denotes potential output and $Y_2$ is an arbitrary output level:

Solución: 2. When production is at Y_1, inflation remains constant from period to period.