econ

Consider the following data about the goods market in a hypothetical closed economy. Assume that government expenditure is constant at $200 million. Also assume that there is equilibrium in the goods market at all times.

Some of the pairs of interest rate and aggregate output that determine equilibrium in the MONEY market include: 2% and $300 million, 4% and $500 million, 6% and $700 million, and 8% and $900 million. Which of the following is NOT consistent with the available data?

A. Both the goods market and the money market have an equilibrium aggregate output of $700 million.

B. There is a positive relationship between interest rates and aggregate output in the money market; the opposite is true in the goods market.

C. Based on the available data, we cannot calculate the equilibrium in the IS-LM diagram.

D. The equilibrium interest rate in the IS-LM diagram is 6%.

I beleive the answer is A butsince ther is no way of telling the equilibrium, am I correct?

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asked by sonia

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