(a)
The effect of an increase in real interest on equilibrium output and how it affects the relevant components of planned spending.
Introduction:
Equilibrium is the point on the graph where both the demand and supply or the price and cost meet at the same place. It is the balance between the opposing forces or influences.
The real interest rate is the rate of interest an investor, saver or lender receives in the wake of taking into account inflation. It can be depicted more formally by the Fisher equation, which expresses that the real interest rate is roughly the nominal interest rate minus the inflation rate.
(b)
The effect of a decrease in marginal propensity to consume on equilibrium output and how it affects the relevant components of planned spending
Introduction:
Marginal propensity to consume ascertains the proportion of extra income that is being spent on the consumption. It is being valued between 0 &1. The MPC can also be measured by the slope of the consumption function.
(c)
The effect of an increase in financial frictions on equilibrium output and how it affects the relevant components of planned spending.
Introduction:
Financial friction is the difference between the return from business capital and the actual cost of the capital in the market. It can be measured as the difference between the marginal product of capital balanced for
(d)
The effect of a decrease in autonomous consumption on equilibrium output and how it affects the relevant components of planned spending.
Introduction:
IS curve shows the correlation between total output and realinterest rate when the goods market is in equilibrium. It is also known as investment saving curve.
(e)
The effect of a decrease in both taxes and government spending by the same amount on equilibrium output and how it affects the relevant components of planned spending
(f)
The effect of a decrease in real interest due to the sensitivity of net exports on equilibrium output and how it affects the relevant components of planned spending
(g)
The effect of tax incentives provided by the government for research and development programs of firms on equilibrium output and how it affects the relevant components of planned spending
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Chapter 20 Solutions
The Economics of Money, Banking and Financial Markets (11th Edition) (The Pearson Series in Economics)
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