(b) In our class discussion, we assume that real investment I does not depend on current output Y. (Recall the 4 factors

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(b) In our class discussion, we assume that real investment I does not depend on current output Y. (Recall the 4 factors

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B In Our Class Discussion We Assume That Real Investment I Does Not Depend On Current Output Y Recall The 4 Factors 1
B In Our Class Discussion We Assume That Real Investment I Does Not Depend On Current Output Y Recall The 4 Factors 1 (24.78 KiB) Viewed 37 times
(b) In our class discussion, we assume that real investment I does not depend on current output Y. (Recall the 4 factors behind I and they do not include Y.) Suppose now I depends positively on Y as well, which is quite acceptable as firms would invest more as income and output rise. How would such a new assumption affect the expenditure multiplier? Explain in words and illustrate in the diagram.
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