Assume that , where is the Keynesian consumption function, is autonomous consumption, is the marginal propensity to consume (), is GDP and is taxes. Suppose that taxes increase and money supply increases in such a way that output is held constant in equilibrium. Ceteris paribus, these specific policy changes will generate:
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Assume that C = c₀ + c₁(Y - T), where C is the Keynesian consumption function, c₀ is autonomous consumption, c₁ is the marginal propensity to consume (c₁ < 1), Y is GDP and T is taxes. Suppose that taxes increase and money supply increases in such a way that output is held constant in equilibrium. Ceteris paribus, these specific policy changes will generate: (A) an increase in investment and a decrease in private consumption. (B) an increase in investment and a decrease in government spending. (C) an increase in investment and an increase in private saving. (D) a decrease in investment and a decrease in public saving.
Also written as: Assume that C = c_0 + c_1(Y - T), where C is the Keynesian consumption function, c_0 is autonomous consumption, c_1 is the marginal propensity to consume (c_1 < 1), Y is GDP and T is taxes. Suppose that taxes increase and money supply increases in such a way that output is held constant in equilibrium. Ceteris paribus, these specific policy changes will generate:
IS-LM model has come up 137 times in 7 exams since 2004.
This question is on Policy mix and relative effectiveness, part of IS-LM model in Macroeconomics.
Comparing fiscal and monetary policy and combining them to hit income and interest targets.
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