The IS-LM diagram on the right shows the initial equilibrium of a closed economy at point A. Now suppose that consumer confidence falls, inducing households to spend less and attempt to save more. In the IS-LM diagram, show the effect of the fall in consumer confidence on the equilibrium in the economy. 1.) Using the 3-point curve line drawing tool, show the effect of a fall in consumer confidence. Properly label your line. 2.) Using the point drawing tool, indicate the new equilibrium point. Label your point 'B'. Carefully follow the instructions above and only draw the required objects. Interest rate, i A Output, Y (trillion dollars) LM₁ IS₁

The IS-LM diagram on the right shows the initial equilibrium of a closed economy at point A. Now suppose that consumer confidence falls, inducing households to spend less and attempt to save more. In the IS-LM diagram, show the effect of the fall in consumer confidence on the equilibrium in the economy. 1.) Using the 3-point curve line drawing tool, show the effect of a fall in consumer confidence. Properly label your line. 2.) Using the point drawing tool, indicate the new equilibrium point. Label your point 'B'. Carefully follow the instructions above and only draw the required objects. Interest rate, i A Output, Y (trillion dollars) LM₁ IS₁

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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