Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift__. by $ billion. by $___

Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift. by $ billion. by $_

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

G.283.

Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment
spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the
economy s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest
rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each
price level? The aggregate demand curve will shift_________ by $_ billion. In what direction and by how much will it
eventually shift? The aggregate demand curve will shift_
billion.
by $

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