Explain, in words, why. Compare each of the cases below to the standard IS curve. Queen Jojo has asked you to visit the economy of Hykeloomtoun. She wants some advice. She collects 20 percent of all income in taxes.
People only consume three quarters of their disposable income.
Businesses invest 150 looms maximum, but this amount declines by 12 looms with every one percentage point rise in the interest rate. The Central bank still manages to keep the price level constant. Queen Jojo wants you to figure out equilibrium income and interest rate. Discuss in some detail. Explain the meaning of stagflation with the help of the AD-AS model.