New Myeconlab With Pearson Etext -- Stanalone Access Card -- For Principles Of Macroeconomics
New Myeconlab With Pearson Etext -- Stanalone Access Card -- For Principles Of Macroeconomics
11th Edition
ISBN: 9780133049831
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 12, Problem 2P

Subpart (a):

To determine

The changes in demand curve.

Subpart (b):

To determine

The changes in the planned aggregate expenditure.

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Students have asked these similar questions
Due to some negative news concerning the impact of global warming on the economy, consumers are becoming more pessimistic about the future to the point of reducing autonomous consumption by 50. What is the immediate impact on income before the economy adjusts to its new equilibrium?  What are the economy’s equilibrium level of output Y and interest rate r following the fall in autonomous consumption? Compute the equilibrium level of consumption and investment spending. With the help of the IS/LM graph, carefully explain what happens to the economy following the fall in consumer confidence.
Why will a reduction in the real interest rate increase investment spending, other things equal? Why is investment spending unstable?
It is possible that the interest rate might affect consumption spending. An increase in the interest rate could, in principle, lead to increases in saving and therefore a reduction in consumption, given the level of income. Suppose that consumption is, in fact, reduced by an increase in the interest rate. How will the IS curve be affected?

Chapter 12 Solutions

New Myeconlab With Pearson Etext -- Stanalone Access Card -- For Principles Of Macroeconomics

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