00:01
Okay, so for a, we have a, the central bank increases the money supply.
00:10
So for interest rate, this one decreases because an increased money supply leads to lower interest rates in the money market.
00:22
As for income, this would increase as lower interest rates stimulate investment and consumption, leading to higher aggregate demand.
00:38
As for consumption, this would also increase since lower interest rates reduce the cost of borrowing, which encourages consumers to spend more.
00:51
Now as for investment, this would also increase because the lower interest rates make borrowing cheaper for businesses and that would encourage them to invest in new projects.
01:11
As for b, so the scenario is that the government increases government purchases.
01:17
Now, as for interest rate, this would increase because higher government spending raises aggregate demand which can lead to higher interest rates in the money market to equilibrate the increased demand for money.
01:39
As for income, this would also increase because the government spending directly adds to aggregate demand which leads to a higher output and income.
01:49
As for consumption, this may increase indirectly due to higher income, but the effect could be offset by higher interest rates...