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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Definitions:

Dividend Policy

A company's strategy or policy to decide how much profit it will pay out to shareholders as dividends.

Retention Ratio

The fraction of net profits not paid out as dividends but kept within the corporation for reinvestment or other purposes.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in dividends, representing how much money a company returns to shareholders versus retaining for growth.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.