Question
Use the IS - LM model to predict the effects of each of the following shocks/policies on income, the interest rate, consumption, and investment. In
Use theIS-LMmodel to predict the effects of each of the following shocks/policies on income, the interest rate, consumption, and investment. In each case, explain what the central bank should do to keep income at its initial level.
a. To facilitate the "green transition", the government provides a huge amount of subsidies to firms to adopt clean technologies.
b. A wave of credit-card fraud increases the frequency with which people make transactions in cash.
c. A best-seller titledRetire Richconvinces the public to increase the percentage of their income devoted to saving.
d. The appointment of a new "hawkish" central bank chair decreases expected inflation
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