ECON2123+PS2-fa13

10 marks 4 if investment is more sensitive to changes

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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:...
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This document was uploaded on 10/04/2013.

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