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q6 In the DSGE model with sticky prices, firms and labour demand is (a) produce what is demanded at the prevailing price; vertical (b) must

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q6

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In the DSGE model with sticky prices, firms and labour demand is (a) produce what is demanded at the prevailing price; vertical (b) must update their expectations; equal to the marginal product of labour (c) use adaptive expectations; horizontal (d) produce at the natural rate of output; downward sloping (e) supply output at marginal cost; perfectly competitive Question 9 Consider the IS curve for the open economy. A decrease in the world real interest rate causes (a) (b) (C) (d) (6) because : the IS curve to shift to the right; it leads to a depreciation of the domestic real exchange rate a rightward movement along the IS curve; it leads to a depreciation of the domestic real exchange rate the IS curve to shift to the left; it leads to an appreciation of the domestic real exchange rate the IS curve shifts to the right; it leads to an appreciation of the domestic real exchange rate a leftward movement along the IS curve; the change in investment and net exports offset each other Question 10 Consider the IS curve for the open economy. An increase in the domestic real interest rate causes (a) (b) (C) (d) (6) because : a leftward movement along the IS curve; it leads to an appreciation of the domestic real exchange rate and causes domestic investment to fall a leftward movement along the IS curve; it leads to a depreciation of the domestic real exchange rate and causes domestic investment to rise the IS curve shifts to the left; it leads to an appreciation of the domestic real exchange rate and causes domestic investment to fall the IS curve shifts to the left; it leads to a depreciation of the domestic real exchange rate and causes domestic investment to fall the IS curve shifts to the right; it leads to an appreciation of the domestic real exchange rate and causes domestic investment to rise

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