21Chp20-Econ3310

21Chp20-Econ3310 - Expenditure Multiplier − − = C + I (...

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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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