10 marks 4 if investment is more sensitive to changes

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 4. “If investment is more sensitive to changes in the interest rate ( suppose investment is a linear function of output and interest rate, I = b0 + b1 Y – b2 i), the IS curve is flatter and fiscal policy is more effective.” Is this statement true or false? Why? Please draw a diagram and use equations/algebra to explain. ( 10 marks) (Final Note: The end-of-chapter questions in Chapter 5 for PS2 are attached.) 4 the 5th updated edition:...
View Full Document

This document was uploaded on 10/04/2013.

Ask a homework question - tutors are online