Explain what effect a reduction in future expected output will have on the IS curve and LM curve in the current period
What will be an ideal response?
A reduction in Ye will cause human wealth to be higher. Individuals will reduce their current consumption and the IS curve will shift left. A reduction in Ye will also cause firms to decrease their expectations of future expected profits. When this occurs, the discounted present value of future profits is lower causing I to decrease. As I decreases, the IS curve shifts left. This will have no effect on the LM curve.
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Education is subsidized because it generates beneficial externalities.
Answer the following statement true (T) or false (F)
How does the politics of farm policy explain why costly and expensive farm programs have persisted in the United States despite a decline in the farm population and in the political power of the farm vote?
What will be an ideal response?
When real planned saving is greater than real planned investment spending
A) real GDP will increase. B) the interest rate will increase. C) the interest rate will decrease. D) real GDP will decrease.
Adjustments in ________ take the economy from the short-run equilibrium to the long-run equilibrium
A) imports and exports B) wages and prices C) the multiplier D) interest rates