the Keynesian assumption.

the classical dichotomy

sticky prices

the Taylor rule

the real money supply adjusts, changing interest rates to bring about the match between output and demand

output adjusts to demand

exogenous disturbances induce spending multiplier effects

collective bargaining adjusts the real wage to bring about full-employment

(A) a completely flexible interest rate policy; (B) a completely flexible money supply policy

a completely flexible interest rate policy; (B) a rule for the money supply to grow at the underlying trend growth rate of output

a constant interest rate policy rule; (B) a completely flexible money supply policy

a constant interest rate policy rule; (B) a rule for the money supply to grow at the underlying trend growth rate of output

Point B can only be reached in the absence of capital mobility

A new equilibrium is reached at point C

A new equilibrium is reached at point B.

The TR curve will shift down until it passes through point B.

A) fixed exchange rates; (B) increase in government deficits due to higher interest rates

(A) fixed exchange rates; (B) lower demand for money due to higher interest rates leading to an increased demand for consumption good

(A) flexible exchange rates; (B) exchange rate depreciating

(A) flexible exchange rates; (B) exchange rate appreciating