INTEREST RATE 15.0 Money Supply 12.5 Money Demand 10.0 7.5 5.0 2.5 0 0 15 30 45 Money Demand 60 75 90 MONEY (Billions of dollars) Money Supply ? Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to known as the by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect.
INTEREST RATE 15.0 Money Supply 12.5 Money Demand 10.0 7.5 5.0 2.5 0 0 15 30 45 Money Demand 60 75 90 MONEY (Billions of dollars) Money Supply ? Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to known as the by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect.
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Transcribed Image Text:INTEREST RATE
15.0
Money Supply
12.5
Money Demand
10.0
7.5
5.0
2.5
0
0
15
30
45
Money Demand
60
75
90
MONEY (Billions of dollars)
Money Supply
?
Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the
changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by
Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to
known as the
by
at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is
effect.
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