Assume the model: And pay attention to the model in answering the questions 

Y = C + I + G + X - M  C = a + b Yd   where a > 0 and 0 < b < 1  I = f (i)             but I ≠  f (Y)         ie, MPI = 0  G = Go Ms = Mso       Ms = money supply/stock Tx = Txo  ……..meaning that Tx ≠ f ( Y ) Md = Mt(Y)+ Ml(i)  [Mt = transactions demand; Ml = liquidity preference demand] X = Xo     X = exports M = Mo + mY  where Mo is autonomous imports, and m is the marginal propensity to import 

In each of the following cases, indicate the effect of the given autonomous change (or policy measure) on each of the listed variables. In each case indicate whether the listed variable increases in value, decreases, or does not change.  

Note:  Answer beside the listed variable.  For example, if in I an increase in the money supply does not bring about a change interest rates, write “does not change” beside “interest rates” at I, 1.  And if an increase in the money supply causes a decrease in the level of income, write “decreases” beside “level of income” at I, 2 

I. An increase in the money supply:  1.   Interest rates  2.   Level of income  3.   Imports  4.   Investment  5.   Government spending  

II. A decrease in the public’s liquidity preference:  6.    Level of income  7.    Investment  8.    Saving  9.    Consumption  10. Exports      

III. An increase in the marginal propensity to import:  11. Income  12. Amount of money demanded for transactions purposes  13. Bond prices  14. Saving  15. Investment   16. Consumption  17. Money supply 18. Exports 

IV. An increase in exports: 19. Income 20. Interest rates 21. Imports 22. Money supply   

V.  A simultaneous and equal increase in taxes and government spending: 23. Level of income 24. Interest rates 25. Investment 

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Status NEW Posted 06 Sep 2017 11:09 AM My Price 8.00

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