Question: Some economists argue that the animal spirits of investors are so important in determining the level of investment in the economy that interest rates do

Some economists argue that the €œanimal spirits€ of investors are so important in determining the level of investment in the economy that interest rates do not matter at all. Suppose that this were true, that investment in no way depends on interest rates.

a. How would Figure 11.4 be different?

P and Z do not shift the r=0 line Binding Situation IS Y* Aggregate output (income), Y Internet rate, r

b. What would happen to the level of planned aggregate expenditure if the interest rate changed?

P and Z do not shift the r=0 line Binding Situation IS Y* Aggregate output (income), Y Internet rate, r

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