Suppose the C/Y Line Shifts to the Right Because of a Change

question 118

Essay

Suppose the C/Y line shifts to the right because of a change in attitude about the future.At the same time,because of political pressure,the government share of GDP declines,with the result that the interest rate stays constant.
(A)If the investment share is the only thing that affects growth in the system,what will happen to growth?
(B)If the consumption share increased by 5 percent,what must have happened to the government share?
(C)Suppose that when the C/Y line shifted to the right and the government cut spending,the interest rate actually fell.What happened to each of the four shares in this case?

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