1. The IS curve is based on the goods market: Y C, + mpc (Y - T) + la-2r +G. Assume that the mpe 80. Draw the IS curve, making sure to label the graph correctly. (a) If government spending G rises by $45 billion, by how much does the IS curve shift to the right? Explain. (b) As shown, for every decline in r (the real interest rate) by one unit investment spending I ries by $2 billion. What is the slope of the IS curve under these conditions? Explain.

1. The IS curve is based on the goods market: Y C, + mpc (Y - T) + la-2r +G. Assume that the mpe 80. Draw the IS curve, making sure to label the graph correctly. (a) If government spending G rises by $45 billion, by how much does the IS curve shift to the right? Explain. (b) As shown, for every decline in r (the real interest rate) by one unit investment spending I ries by $2 billion. What is the slope of the IS curve under these conditions? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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