Use the Keynesian-Cross Model to Illustrate Graphically the Impact of an Increase

question 7

Essay

Use the Keynesian-cross model to illustrate graphically the impact of an increase in the interest rate on the equilibrium level of income. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curve shifts; and v. the terminal equilibrium values.
b. Explain in words what happens to equilibrium income as a result of the increase in the interest rate.

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Definitions:

Earphones

A set of small loudspeakers that fit directly in or over the ears for individual listening.

Microseconds

A unit of time equal to one millionth (10^-6) of a second.

Auditory Neurons

Specialized neurons that transmit sound information from the ear to the brain, allowing for hearing.

Loudness

The perception of how strong or intense a sound seems, which can be influenced by its amplitude and frequency.