Question
Consider an economy described by the following equations: C = 100 + 0.6 ∗ (Y −
- T (consumption function) I = 200 − 1000 ∗ r (investment function) G = T = 100 (government purchase and tax) where Y is the national income and r is the interest rate. Suppose the government purchase G is raised from 100 to 150, how much will this shift the IS curve to the right?
Solution
Delta Y = Delta G times multiplier
This will shift the IS curve to the right by
50 / (1 − 0.6) = 125.
More Research Questions
- In the context of the Balance of Payments (BOP), which transaction represents an entry in the Financial Account (Capital Account) that would be recorded as...
- Based on current economic data (2024–2025 projections), which of the following correctly lists the given South Asian countries in descending order of their...
- Given two lines of regression x+3y=11 and 2x+y=7. Find the coefficient of correlation between x and y.
- Let the correlation coefficient between X and Y be 0.6. Random variables Z and W are defined as Z=X+5 and W=Y/3. What is the correlation coefficient betwee...
- The "Multiplier" effect is larger when the marginal propensity to consume (MPC) is:
- If a researcher finds that the variance of the error term in a regression is proportional to the square of one of the independent variables, the model suff...
- Leontief Preferences are related to
- Ed=1 i. MR is negative ...
- For which preferences the income offer curve and the price offer curve are equal?
- Which of the following is NOT an automatic (built-in) stabilizer in an economy?
