About the state of economy and future productivity growth

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Reference no: EM13801646

If you were Chairperson of the Federal Reserve. Show each of the following shocks on an IS-MP diagram. Say what your interest rate response would and why, as well as show its effects on the diagram.

a) Consumers become pessimistic about the state of the economy and future productivity growth.

b) Improvements in the information technology increase productivity and therefore increase the marginal product of capital.

c) A booming economy in Europe this year leads to an unexpected increase in the demand by European consumers for US goods.

d) Americans develop an infatuation with all things made in New Zealand and sharply increase their imports from that country.

e) A housing bubble bursts, so that housing prices fall by 20% and new home sales drop sharply.

Reference no: EM13801646

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