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?
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.
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Which of the following is the reason supply curves typically slope upward?
a. Opportunity cost of production increases as quantity supplied increases. b. Supply increases as opportunity cost decreases. c. Price increases as supply decreases. d. Quantity supplied is unrelated to price. e. The income and substitution effects of a price change.
In the 1990s, foreign direct investment had become the most important source of funds for developing countries
a. True b. False Indicate whether the statement is true or false
If the absolute value of the tax elasticity of supply is 8, a tax cut of 0.5 percent should cause the output supplied to
A. Decrease by 16 percent. B. Decrease by 4 percent. C. Increase by 4 percent. D. Increase by 16 percent.
A nation will neither export nor import a specific product when its
A. export supply curve lies above its import demand curve. B. export supply curve is upward-sloping. C. domestic price equals the world price. D. import demand curve is downward-sloping.