Q$19$

$3$ Points

Consider the real intertemporal model with investment we learned in class. Determine how the

following affects the output demand curve, drawn on the Yr$-$plane. Q$19\mathrm{.}1$

$1$ Point

The marginal propensity to consume increases.

The output demand curve becomes flatter.

The output demand curve becomes steeper.

The slope of the output demand curve may not change, but the curve shifts to the right.

The slope of the output demand curve may not change, but the curve shifts to the left.

Q$19\mathrm{.}2$

$1$ Point

The intertemporal substitution effect of the real interest rate on current consumption increases.

The output demand curve becomes flatter.

The output demand curve becomes steeper.

The slope of the output demand curve may not change, but the curve shifts to the right.

The slope of the output demand curve may not change, but the curve shifts to the left. Q$19\mathrm{.}3$

$1$ Point

The demand for investment goods becomes more responsive to the real interest rate.

The output demand curve becomes flatter.

The output demand curve becomes steeper.

The slope of the output demand curve may not change, but the curve shifts to the right.

The slope of the output demand curve may not change, but the curve shifts to the left.