Draw and interpret a “Keynsian cross” graph for the following situations. See the model in ch. 12. (Each can be analyzed independently of the other, so separate graphs for each part). briefly interpret by answering: Which component of aggregate expenditure (AE) shifted? Why? How did that shift the AE curve? What happens the economy’s output and income? For the latter, use the concept of changes in inventory and interpret the graph. Sign your graph and include the picture. a) The stock market reaches another all-time high. Consumers are wealthier and businesses are feeling confident. b) The Federal Reserve decides to end the record low interest rate environment and increases rates across the term structure by 200 basis points.
Draw and interpret a “Keynsian cross” graph for the following situations. See the model in ch. 12. (Each can be analyzed independently of the other, so separate graphs for each part). briefly interpret by answering: Which component of aggregate expenditure (AE) shifted? Why? How did that shift the AE curve? What happens the economy’s output and income? For the latter, use the concept of changes in inventory and interpret the graph. Sign your graph and include the picture.
a) The stock market reaches another all-time high. Consumers are wealthier and businesses are feeling confident.
b) The Federal Reserve decides to end the record low interest rate environment and increases rates across the term structure by 200 basis points.
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