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Unformatted text preview: Expenditure Multiplier − − = C + I ( i ) + G + NX ( i ) ISLM Model 2. Net exports NX (negative relationship)
Higher i , makes the dollar appreciate, exports are more
expensive so NX ↓ 1. Planned investment spending I (negative relationship)
Businesses invest in physical capital as long as they expect to
earn more than the interest cost of the loan to ﬁnance the
investment or more than from investing their funds in bonds.
Higher i , less investment projects are proﬁtable and I ↓ Interest rates i have an eﬀect on Y Equilibrium in the Goods Market: The IS Curve Aggregate Output ...
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- Fall '08