Using the classical model, suppose desired Investment spending falls. Explain (don't just tell) how each of the following would change, if at all.
a. Real GDP
b. National Savings (Y-C-G)
c. Real Interest Rates
Using the classical Model, suppose taxes decrease by $100 while government spending is constant. Also, the Marginal Propensity to Consume is 0.90. For a, b, c below, how much does each of the following change, if at all, and in which direction. For D, tell which direction.
a. Real GDP
b. National Savings (Y-C-G)
c. Investment Spending
d. Real Interest Rates