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28 Sep 2019
We have assumed that consumption depends only on disposable income. Now suppose that consumptions depend on both disposable income and the interest rate. As the interest rate increases, consumption decreases.
a. If consumption suddenly begins to depend on the interest rate, what is the effect on the slope of the IS curve?
b. Will this change make monetary policy more or less effective? Explain.
We have assumed that consumption depends only on disposable income. Now suppose that consumptions depend on both disposable income and the interest rate. As the interest rate increases, consumption decreases.
a. If consumption suddenly begins to depend on the interest rate, what is the effect on the slope of the IS curve?
b. Will this change make monetary policy more or less effective? Explain.
1
answer
0
watching
51
views
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Joshua StredderLv10
28 Sep 2019