Show using a graph how the following shocks would affect equilibrium output. (Which parameters in the Keynesian model change? How does that shift the expenditure schedule? What happens to output as a result?) (a) Business confidence increases (b) The stock market declines (c) Credit market conditions become easier (d) The US dollar depreciates relative to the Euro (e) The stock market booms in Canada (Hint: use one picture to show what happens to Canada, then another to show how this affects the US economy)

Show using a graph how the following shocks would affect equilibrium output. (Which parameters in the Keynesian model change? How does that shift the expenditure schedule? What happens to output as a result?) (a) Business confidence increases (b) The stock market declines (c) Credit market conditions become easier (d) The US dollar depreciates relative to the Euro (e) The stock market booms in Canada (Hint: use one picture to show what happens to Canada, then another to show how this affects the US economy)

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

2. Practice with the Keynesian model-graphs
Show using a graph how the following shocks would affect equilibrium output. (Which parameters in the Keynesian
model change? How does that shift the expenditure schedule? What happens to output as a result?)
(a) Business confidence increases
(b) The stock market declines
(c) Credit market conditions become easier
(d) The US dollar depreciates relative to the Euro
(e) The stock market booms in Canada (Hint: use one picture to show what happens to Canada, then another to show
how this affects the US economy)

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Step 2: Examine what happens when business confidence increase

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Step 3: Examine what happens when the stock market tumbles

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Step 4: Examine what happens when credit becomes more accesible

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Step 5: Examine what happens when the home dollar depreciates

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Step 6: Examine what happens when the stock market booms in C

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