IS Curve Exogenous Variables and Parameters
Table 1
-Given the values in the table above,if the real interest rate rises from 5 to 6,the change in household saving is ________.
A)negative 0.5
B)negative 1.55
C)negative 0.45
D)1.55
E)none of the above

Question

IS Curve Exogenous Variables and Parameters
Table 1 
-Given the values in the table above,if the real interest rate rises from 5 to 6,the change in household saving is ________.
A)negative 0.5 
B)negative 1.55 
C)negative 0.45 
D)1.55 
E)none of the above

Quizplus · Accepted Answer

According to the table, the coefficient for real interest rate in the equation for household savings is -0.09. Therefore, if the real interest rate increases by 1 (from 5 to 6), we can expect household saving to decrease by 0.09. Thus, the change in household saving would be:
-0.09 x 1 = -0.09
Therefore, the answer is C: negative 0.45.