IS 2 IS 3 IS 1 Desired national saving, Sd, Desired investment, I d 15. Accordin

Question

IS 2 IS 3 IS 1 Desired national saving, Sd, Desired investment, I d 15. According to Abel, Bernanke and Croushore, an increase in the government expenditure will A. Have no impact on the IS curve. B. Shift the IS curve from IS 1 to IS 3. C. Shift the IS curve from IS 1 to IS 2. D. Represent and movement along IS 1. E. None of the above. 8 16. S nowdon and Vane in discussing the New Keynesian model's ability to explain the stylized business cycle facts not that A. The non-neutrality of money in the new Keynesian models is inconsistent with the stylized fact that money is procyclical and leading. B. New Keynesian analysis is consistent with the procyclical behavior employment as well as procyclical consumption, investment and government expenditures and productivity C. New Keynesian models, unlike the old Keynesian modes, imply a countercyclical D. Procyclical inflation is inconsistent with new Keynesian models which emphasize E. None of the above. real wage. aggregate supply disturbances.

Explanation / Answer

15. Option C.

An increase in government spending increases income in the economy and more goods and services are produced, shifting the IS curve to the right.

16. Option B.

According tot he authors, new keynesian is successful in explaining this business cycle stylized fact.

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