Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that inves

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Suppose That Consumer Spending Initially Rises By 5 Billion For Every 1 Percent Rise In Household Wealth And That Inves 1 (21.91 KiB) Viewed 13 times

Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household 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 3. Instructions: Enter your answers as a whole number. a. If household wealth falls by 4 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? Aggregate demand will initially shift (Click to select) by $ b. In what direction and by how much will it eventually shift? Aggregate demand will eventually shift (Click to select) by S billion. billion Help Save & Exit