Suppose that at the current interest rate of 4%, gross investment is $2,500, government purchases are $3,000, and net exports are $500.

a. Using the graph below, draw the investment schedule (I), government purchases schedule (G), net exports schedule (NX), and the combined I + G + NX line for this economy.

b. Now suppose interest rates increase to 6%. As a result, gross investment falls to $1,500 while government purchases and net exports remain constant at $3,000 and $500, respectively. Using the graph below, draw the new investment schedule (I), government purchases schedule (G), net exports schedule (NX), and the new combined I + G + NX line for this economy.

Answer rating: 100% (QA)

a Interest rate 4 I G NX 2500 3000 500 6000 In followin... View the full answer