The IS curve shows the equilibrium combinations of the real interest rate and real GDP. a. Demonstrate
Question:
a. Demonstrate using graphs how the IS curve represents equilibrium in the goods market.
b. Now suppose that firms become more optimistic about future profits. Show the effect on the goods market and derive the new IS curve.
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a A graph should be drawn with aggregate expenditure AE measured on the vertical axis and real ...View the full answer
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Related Book For 
Macroeconomics
ISBN: 9780132109994
1st Edition
Authors: Glenn Hubbard, Anthony Patrick O'Brien, Matthew P Rafferty
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