Suppose there is a closed economy without government expenditure or taxation in which aggregate consumption expenditure is the following function of aggregate income and the rate of interest (expressed per cent) : . Suppose investment expenditure is given by the following function :
What is the value of the slope of the IS curve for this economy?
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Suppose there is a closed economy without government expenditure or taxation in which aggregate consumption expenditure C is the following function of aggregate income Y and the rate of interest (expressed per cent) r: C = 388 + 0·75Y - 15r. Suppose investment expenditure I is given by the following function: I = 1863 + 0·05Y - 25r What is the value of the slope of the IS curve for this economy? (A) − 0·0175 (B) − 0·02 (C) − 0·025 (D) None of the above
Also written as: Suppose there is a closed economy without government expenditure or taxation in which aggregate consumption expenditure C is the following function of aggregate income Y and the rate of interest (expressed per cent) r: C = 388 + 0*75Y - 15r. Suppose investment expenditure I is given by the following function: I = 1863 + 0*05Y - 25r What is the value of the slope of the IS curve for this economy?
IS-LM model has come up 137 times in 7 exams since 2004.
This question is on The slope of the IS curve, part of IS-LM model in Macroeconomics.
What makes the IS curve steep or flat, including the multiplier and the interest sensitivity of investment.
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Question from the JNU SSS 2014 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.