Essays

Question 1

Interest rates diagram

Answer 1

Leftward shift
Keynesian LRAS
pl decrease

Question 2

Interest rates analysis:

Answer 2

• Incentive to save increases
• cost of borrowing increases
• consumer expenditure decreases
• MPS increases
• MPC decreases
• decrease in investment
• riskiness of losing on capital increase
• consumer expenditure & investment are components of AD.
• leftward shift in demand
• price leek decreases
• decrease in real GDP
• new macroeconomic equilibrium

Question 3

Disposable income intro

Answer 3

The average disposable income can be defined as the total personal income minus total person current taxes divided by population size.

Question 4

Diagram - disposable income

Answer 4

Keynesian diagram

Increase in demand.

Question 5

Disposable income analysis

Answer 5

• increased incentive for consumer spending on domestically produced goods and services.
• increase in consumer expenditure
• MPC > 0
• MPS

Question 6

Interest rates introduction

Answer 6

Aggregate demand is the total demand for a country’s goods and services at a given price level and in a given time period. Aggregate supply is the total amount that producers in an economy are willing and able to supply at a given price level in a given time period.

Question 7

Evaluation interest rates

Answer 7

• the level of spare capacity
• other components of AD
• incentive for MPS/MPC