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2) Suppose government spending increases by $5 and autonomous part of real interest rate increases by 2%. Also, assume household's marginal propensity to consume is

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2) Suppose government spending increases by $5 and autonomous part of real interest rate increases by 2%. Also, assume household's marginal propensity to consume is 0.6 (mpc=0.6) and the sum of the responsiveness of consumption to real interest rate, the responsiveness of investment to real interest rate, and the responsiveness of net exports to real interest rate is equal to 1.1 (c+d+x = 1.1). For a given level of the inflation rate it, how far will the AD curve shift to the left/right? (7 points) 2) Suppose government spending increases by $5 and autonomous part of real interest rate increases by 2%. Also, assume household's marginal propensity to consume is 0.6 (mpc=0.6) and the sum of the responsiveness of consumption to real interest rate, the responsiveness of investment to real interest rate, and the responsiveness of net exports to real interest rate is equal to 1.1 (c+d+x = 1.1). For a given level of the inflation rate it, how far will the AD curve shift to the left/right? (7 points)

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