Question: Using the data in table 12.3, consider the new equilibrium income and interest rate for the following changes, assuming no sterilisation and that P and

Using the data in table 12.3, consider the new equilibrium income and interest rate for the following changes, assuming no sterilisation and that P and P∗ are fixed. Draw each situation and the likely path to the new equilibrium.

(i) autonomous spending rises by 20 and under floating S = 1.33.

(ii) Ms rises from 3 to 4, i.e., LM becomes r = −8 + 0.5y and under floating S = 1.92.

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