1. For each of the following scenarios explain, with the aid of an IS-LM diagram, what happens to equilibrium output and the real interest, ceteris-paribus. (a) Government spending falls. (b) Autonomous consumption increases. (c) Government lovgers the effective tax rate on capital. (d) There's a major credit scandal. (e) Financial analysts predict that inflation will be higher next year.
1. For each of the following scenarios explain, with the aid of an IS-LM diagram, what happens to equilibrium output and the real interest, ceteris-paribus. (a) Government spending falls. (b) Autonomous consumption increases. (c) Government lovgers the effective tax rate on capital. (d) There's a major credit scandal. (e) Financial analysts predict that inflation will be higher next year.
Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance
Section: Chapter Questions
Problem 1.1P
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