This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Suppose individuals expect future output to be lower and future interest rates to be lower. Given ... (Read 82 times)

saraeharris

  • Hero Member
  • *****
  • Posts: 546
on: Jun 30, 2018
Suppose individuals expect future output to be lower and future interest rates to be lower. Given this information, how will individuals alter consumption in the current period? Explain.
 
  What will be an ideal response?

Question 2

Based on your understanding of the IS-LM model, graphically illustrate and explain what effect a reduction in consumer confidence will have on output, the interest rate, and investment.
 
  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

Sassygurl126

  • Sr. Member
  • ****
  • Posts: 320
Reply #1 on: Jun 30, 2018
Answer to Question 1

The effects are ambiguous. The reduction in future Y will reduce human wealth and cause C to decrease. The decrease in future rates will increase the present value of future disposable income and increase C.

Answer to Question 2

A reduction in consumer confidence will cause a reduction in consumption and, therefore, a reduction in demand and a leftward shift in the IS curve. As Y decreases, money demand will decrease causing the interest rate to fall. The effects on I are ambiguous. The lower Y will cause I to fall while the lower interest rate will cause I to increase.


saraeharris

  • Member
  • Posts: 546
Reply 2 on: Jun 30, 2018
:D TYSM

miss_1456@hotmail.com

  • Member
  • Posts: 289
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

Most women experience menopause in their 50s. However, in 1994, an Italian woman gave birth to a baby boy when she was 61 years old.

Did you know?

For high blood pressure (hypertension), a new class of drug, called a vasopeptidase blocker (inhibitor), has been developed. It decreases blood pressure by simultaneously dilating the peripheral arteries and increasing the body's loss of salt.

Did you know?

Methicillin-resistant Staphylococcus aureus or MRSA was discovered in 1961 in the United Kingdom. It if often referred to as a superbug. MRSA infections cause more deaths in the United States every year than AIDS.

Methicilli ...
Did you know?

An identified risk factor for osteoporosis is the intake of excessive amounts of vitamin A. Dietary intake of approximately double the recommended daily amount of vitamin A, by women, has been shown to reduce bone mineral density and increase the chances for hip fractures compared with women who consumed the recommended daily amount (or less) of vitamin A.

Did you know?

When blood is deoxygenated and flowing back to the heart through the veins, it is dark reddish-blue in color. Blood in the arteries that is oxygenated and flowing out to the body is bright red. Whereas arterial blood comes out in spurts, venous blood flows.

Stellar Birth Rates Stellar Birth Rates
Worldwide Mortality Rates and Causes of Death in Children Under Age 5 Worldwide Mortality Rates and Causes of Death in Children Under Age 5
U.S. Cancer Death Rates U.S. Cancer Death Rates
Change in air temperature at various air flow rates for a 7 pass operation Change in air temperature at various air flow rates for a 7 pass operation
Shift to one side. Let the recipient’s arm hang down. Knead upper and lower arm muscles from ... Shift to one side. Let the recipient’s arm hang down. Knead upper and lower arm muscles from ...
Role of Productivity in Determining Output per Worker, 2009 Role of Productivity in Determining Output per Worker, 2009
Video: Fermentation pathways

For a complete list of videos, visit our video library