2. Think about an economy initially on its long run equilibrium. Explain the effects of the...

 

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2. Think about an economy initially on its long run equilibrium. Explain the effects of the following (in turn) on the price level and output. In your answer make sure that you explain how the economy will go back to its long run equilibrium by describing proper mechanism and terminology. (a) Autonomous consumption spending decreases. (b) Tax rate increases. (c) Expansionary monetary policy. (d) Sudden loss of investor confidence. 2. Think about an economy initially on its long run equilibrium. Explain the effects of the following (in turn) on the price level and output. In your answer make sure that you explain how the economy will go back to its long run equilibrium by describing proper mechanism and terminology. (a) Autonomous consumption spending decreases. (b) Tax rate increases. (c) Expansionary monetary policy. (d) Sudden loss of investor confidence.

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Answer a Autonomous consumption spending decreases Autonomous consumption refers to the portion of consumer spending that is independent of disposable income If autonomous consumption spending decreas... View the full answer