This topic contains a solution. Click here to go to the answer

Author Question: Explain why current consumption might change even if current income does not change. What will be ... (Read 69 times)

lilldybug07

  • Hero Member
  • *****
  • Posts: 546
Explain why current consumption might change even if current income does not change.
 
  What will be an ideal response?

Question 2

Explain in detail what effect a Fed sale of bonds will have on: (1 ) the LM curve; and (2 ) the IS curve.
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

AngeliqueG

  • Sr. Member
  • ****
  • Posts: 343
Answer to Question 1

C also depends on wealth. If any of the determinants of wealth change, without current disposable income changing, individuals will change current consumption. In short, there are other determinants of current consumption.

Answer to Question 2

A Fed sale of bonds will cause a reduction in H and a reduction in the money supply. This will cause an excess demand for money and the interest rate must increase to restore money market equilibrium. The LM curve will shift up as a result of this to reflect the now higher interest rate. The IS curve does not shift as a result of this. We would simply observe a movement along the IS curve.




lilldybug07

  • Member
  • Posts: 546
Reply 2 on: Jun 30, 2018
Wow, this really help


jackie

  • Member
  • Posts: 324
Reply 3 on: Yesterday
Excellent

 

Did you know?

Urine turns bright yellow if larger than normal amounts of certain substances are consumed; one of these substances is asparagus.

Did you know?

One way to reduce acid reflux is to lose two or three pounds. Most people lose weight in the belly area first when they increase exercise, meaning that heartburn can be reduced quickly by this method.

Did you know?

Throughout history, plants containing cardiac steroids have been used as heart drugs and as poisons (e.g., in arrows used in combat), emetics, and diuretics.

Did you know?

A headache when you wake up in the morning is indicative of sinusitis. Other symptoms of sinusitis can include fever, weakness, tiredness, a cough that may be more severe at night, and a runny nose or nasal congestion.

Did you know?

Opium has influenced much of the world's most popular literature. The following authors were all opium users, of varying degrees: Lewis Carroll, Charles, Dickens, Arthur Conan Doyle, and Oscar Wilde.

For a complete list of videos, visit our video library