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Set the policy instruments to G = 80, t = 0.20, c = 0.75, and b = 40. Investment = autonomous investment - b*f, now
Set the policy instruments to
G = 80,t = 0.20,c = 0.75, and b = 40. Investment = autonomous investment - b*f, now increase the sensitivity of investment to the interest rate, b, from 40 to 80. What happens to the slope of the IS curve? Why?
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