(10 points) We now incur shocks as provided in red font. Solve for a new expression of the consumption function and aggregate expenditure curve, solve for the new equilibrium 1
output and add this new equilibrium point to both of your diagrams (label as point B). Please show all work.d)(10 points) Are your results consistent with the new economy? Why or why not? Explain in detail. Part 2: True / False Questions (2 points each - 40 points total) Answer T for True and F for False1)Consumption is positively related to stock market wealth but negatively related to taxes and tax rates. 2)If aggregate expenditures rise unexpectedly, then inventories will also rise unexpectedly. 3)Services are the most interest rate sensitive component of consumption. 4)Investment is the most cyclical component of aggregate expenditures.
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- Summer '17