A3: In the ISLM model, if consumption depends on interest rate and income, i.e.: C= co + ciY – c2T –c3r Where Y=income, T=taxes, r=interest rate, and all co-c3 are positive numbers. Then which of the followings is/are true? a) Increase in Government Spending without changing taxes will increase consumption b) Increase in Government Spending without changing taxes will decrease consumption c) Increase in money supply will increase consumption d) None of the above

A3: In the ISLM model, if consumption depends on interest rate and income, i.e.: C= co + ciY – c2T –c3r Where Y=income, T=taxes, r=interest rate, and all co-c3 are positive numbers. Then which of the followings is/are true? a) Increase in Government Spending without changing taxes will increase consumption b) Increase in Government Spending without changing taxes will decrease consumption c) Increase in money supply will increase consumption d) None of the above

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

There may be no correct option, or more than one correct option..

A3: In the ISLM model, if consumption depends on interest rate and income, i.e.:
C= co + c1Y – c2T –C3r
Where Y=income, T=taxes, r=interest rate, and all co-c3 are positive numbers. Then
which of the followings is/are true?
a) Increase in Government Spending without changing taxes will increase
consumption
b) Increase in Government Spending without changing taxes will decrease
consumption
c) Increase in money supply will increase consumption
d) None of the above

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