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Consider an IS-LM Model with no international trade. Taxes are proportional to income. Now if the animal spirits deteriorates, i.e. the investment function changes to
Consider an IS-LM Model with no international trade. Taxes are proportional to income. Now if the "animal spirits" deteriorates, i.e. the investment function changes to decrease the value of the autonomous part, [lo decreases in l-lo-b-i,where b is the senstivity of investment to the interest rate i] then what will happen to each of the following. Choose From Increase Decrease No change Can't say 1.Investment 2.Income 3.Consumption 4.Government Expenditure 5.Money supply 6.Portfolio and demand for money 7.Taxes Collected 8.Interest Rate 9.Circulation or transactions demand for money
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