3. Consider the aggregate expenditure equation AE = 2,000 - 1,000+ 0.7 Y, where the letters represent the usual economic variables. Which of the following is correct? 1. (2,000 - 1,000r) constitute the autonomous components of aggregate expenditure. 2. The sign of the coefficient on the interest rate ris wrong, because aggregate expenditure rises with the interest rate. 3. The equation indicates that a change in the interest rate r shifts the aggregate expenditure line in the Keynesian Cross diagram.

3. Consider the aggregate expenditure equation AE = 2,000 - 1,000+ 0.7 Y, where the letters represent the usual economic variables. Which of the following is correct? 1. (2,000 - 1,000r) constitute the autonomous components of aggregate expenditure. 2. The sign of the coefficient on the interest rate ris wrong, because aggregate expenditure rises with the interest rate. 3. The equation indicates that a change in the interest rate r shifts the aggregate expenditure line in the Keynesian Cross diagram.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 4.8P

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