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In: Economics

In the IS-LM model, analyze the effects of increased optimism of businesses on all the endogenous...

  1. In the IS-LM model, analyze the effects of increased optimism of businesses on all the endogenous variables (Y, r, I, S, C, T, L1, L2).

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In the IS-LM model, analyze the effects of increased optimism of businesses on all the endogenous variables (Y, r, I, S, C, T, L1, L2).

Answer: here Y, i, I are endogenous varibles endogenous means which determined within the model. If investment increase than output/ income increase and consumption also increases. Increase in investment shifts the LM curve outward leads to increase in output and decreases interest rate. Due to reduction in rate of interest demand for money increases . Diagram is given below

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Rahul Sunny answered 7 months ago
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