AB 204 STUDY Education Terms/ab204study.com AB 204 STUDY Education Terms/ab204study.com | Page 9

3. Assume that in a country the total holdings of banks were as
follows:
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AB 204 Unit 8 Assignment

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1. Long-run Macroeconomic Equilibrium and Stock Market Boom
Let us assume the economy reaches its long-run macroeconomic
equilibrium in 2020. When the economy is in the long run
macroeconomic equilibrium, the stock market will also reach its
boom. This will in turn lead to increases in stock prices more than
expected, and the stock prices will stay high for some period.
2) Studies indicate that net exports and net capital outflows tend to
be equal.
a) Why do net exports and net capital outflows tend to be equal?
How does an increase in the price level change interest rates?
b) How does this change in interest rates lead to changes in
investment and net exports?
3) Assume there is a decrease in the demand for goods and services,
which leads to a decrease in the real GDP and eventually the
economy into recession.