| 8 7 = |Untitled - Paint X File Home View ? Cut Crop WODOGA . Outline Copy Resize DODODGY . Filly Paste Select Brushes Size Color Color Edit Edit with Rotate 2 colors Paint 3D Clipboard Image Tools Shapes Colors Suppose the parameters of the IS curve are a = 0, b = 3/4, F = 2% and the real interest rate is initially R = 2%. Explain what happens to short-run output in each of the following scenarios. (a) The real interest rate rises from 2% to 4%. (b) The real interest rate falls from 2% to 1%. (c) ac increases by 1 percentage point. (d) ag decreases by 2 percentage points. (e) dim decreases by 2 percentage points. Problem 2 - Exercise 3 from Chapter 11 of the textbook. Consider the following changes in the macroeconomy. Show how to think about them using the IS curve, and explain how and why GDP is affected in the short run (Hint: What parameters of the IS curve you think are most affected by these changes?). (a) The government offers a temporary investment tax credit: for each dollar of investment that firms undertake, they receive a credit that reduces the taxes they pay on corporate income. (b) A booming economy in Europe this year leads to an unexpected increase in the demand by European consumers for U.S. goods. (c) U.S. consumers develop and infatuation with all things made in New Zealand and sharply increase their imports from that country. 1046, 579px 1 1920 x 1080px 100% + Type here to search O Eli CH w O M N 8:43 PM R 4/22/2021