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Effects of this change in the is-mp diagram

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Reference no: EM131523877

1. Suppose the central bank changes its interest rate rule to set a higher value of the saving real interest rate for a given level of output.

a. Show the effects of this change in the IS-MP diagram.

b. Describe whether this change increases, decreases, or has no effect on the following variables (or whether it is not possible to tell):

i. Output.

ii. The saving real interest rate.

iii. The borrowing real interest rate.

iv. The interest rate differential.

Reference no: EM131523877

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