National output, aka GNP, is the sum of C+I+G+(X-M) (X-M is net exports).
So, for each scenario, decide how one (or more) of the above factors would change. A fall in interest rates should spur investments (I), an appreciation of the home currency should make imports cheaper and exports more expensive, a tax cut should increase disposable income which increases consumption, (A cut in Foreign? whats that). Anyway, take it from here.
What is the effect of the following shocks on the short-run level of national output?
a A fall in interest rates?
b An appreciation of the Home currency?
c A tax cut?
d A tax cut in Foreign?
e A drop in consumer confidence (consumer want to spend less)?
f News that imported products make you sick?
1 answer
1 answer