1. Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household...
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1. Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift? LO1
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Related Book For
Essentials Of Economics
ISBN: 9780077502140
3rd Edition
Authors: Stanley Brue, Campbell McConnell, Sean Flynn
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