Question: Suppose that consumer spending initially rises by ( $ 5 ) billion for every 1 percent rise in househoid wealth and that

Suppose that consumer spending initially rises by \(\$ 5\) billion for every 1 percent rise in househoid wealth and that investment spending initially rises by \(\$ 20\) billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level?
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The aggregate demand curve will shift by \(\$ \) billion.
In what direction and by how much will it eventually shif?
The aggregate demand curve will shift
by \(\$ \)
] billion.
Suppose that consumer spending initially rises by

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