Questions on national income
National income equilibrium
In each of the following questions, assume that the economy is in equilibrium at X. Identify the new equilibrium following the changes given below:
- Consumer confidence rises.
- There is better use of new technology leading to cost efficiencies by firms.
- There is a downturn in an economy’s exports.
- There is a rise in household savings.
- Interest rates fall.
- Consumer confidence falls triggering a fall in business confidence.
- Oil prices rise, and at the same time unemployment falls.
- There is a general rise in business taxes, and a rise in imports relative to exports.
- Government spending on education rises.
- Banks reduce their lending to households and firms reduce their investment in new technology.