宏观经济学第七版答案曼昆

AnswerstoSelectedStudentGuideProblems**Notetoinstructors:Theanswerstomostofthedataquestionsweretakenfromthe2009EconomicReportofthePresident.Somedatafor2008weretakenfromtheBureauofEconomicAnalysisandDepartmentofLaborwebsites.ThedatamayberevisedinlaterpublicationsDataQuestions1.a.Thefollowing2008data,inbillionsofdollars,wereobtainedfromtheBureauofEconomicAnalysisWebsiteathttp://www.bea.gov/.Thedatamayberevisedinfuturepublications.Table2–7(1)(2)GrossDomesticProduct$14,264.6EQUALSConsumption$10,057.9+Investment$1,993.5+GovernmentPurchasesofGoodsandServices$2,882.4+Exports$1,859.4–Imports$2,528.6b.GDP=$10,057.9+$1,993.5+$2,882.4–$669.2=$14,264.6(billion)2.a.Table2–8(1)(2)(3)(4)(5)%Change%ChangeinCPIfromGDPinGDPDeflatorfromYearCPIPrecedingYearDeflatorPrecedingYear2007207.34119.823.82.22008215.30122.50b.ImportedoilisnotpartofU.S.GDP.Therefore,itisnotincludedinthecalcula-tionoftheGDPdeflator,althoughitisincludedinthecalculationoftheCPIwhenitispurchasedbyconsumers.BecausetheUnitedStatesimports,ratherthanproduces,alargeportionoftheoilhouseholdsconsume,theoilpriceincreasehadagreatereffectontheCPIthanontheGDPdeflatorfrom2007to2008.203CHAPTER2TheDataofMacroeconomics3.a.Table2–9(1)(2)(3)(4)(5)%ChangeTotalU.S.inRealGDPRealGDPPopulationRealGDPperCapitafromYear($inbillions)(inmillions)perCapitaPrecedingDecade19785,015222.6$22,53022.219886,743245.0$27,52219.319989,067276.1$32,84016.7200811,652304.1$38,316b.U.S.realGDPpercapitagrewthefastestfrom1978to1988;itgrewtheslowestfrom1998to2008.4.a.andc.Table2–10(1)(2)(3)(4)(5)(6)(7)GDP%ChangeReal%ChangeNominal%ChangeYearDeflator(P)inPGDP(Y)inYGDP(Y)inPY($inbillions)($inbillions)2007119.8211,52413,8082.21.13.32008122.5011,65214,265b.3.3Problems10.a.Thecostsofexpectedinflationaretheshoeleathercostsofinflation,themenucostsofchangingprices,thecostofunindexedtaxes,thecostofgreatervariabilityinprices,andthecoststopeoplewhoreceiveincomesfixedinnominalterms(suchasprivatepensions)thatwerecontractedbeforetheinflationwasexpected.b.Althoughfederalincometaxesarenowindexedforinflation,taxesoncapitalgainsandinterestincomearenot.Consequently,ifinflationweretofallfrom2percentto0percentand,accordingtotheFishereffect,nominalinterestratesweretofallby2percentagepoints,theafter-taxrealreturntosavingandinvest-mentwouldincrease.c.3percent,assumingaconstantvelocityofmoneyd.Expectedinflationwouldfall;thenominalinterestratewouldfall;realmoneydemandwouldincreasebymorethanthe3-percentgrowthinoutput;realmoneybalanceswouldincreasebythesameamount;thepricelevelwouldfall;actualinflationwouldtemporarilybenegative.e.With0percentinflation,realwagescanfallonlyifnominalwagesdecline,andworkersvigorouslyresistreductionsinnominalwages.204AnswerstoSelectedStudentGuideProblemsCHAPTER4MoneyandInflationDataQuestions1.a.Table4–9(1)(2)(3)(4)(5)(6)(7)ConsumerPriceIndicesCPICPIAll%Medical%CPI%YearItemsChangeCareChangeEnergyChange197865.261.852.581.4124.370.01988118.3138.689.337.874.715.21998163.0242.1102.932.150.4130.02008215.3364.1236.7b.$8.49c.1978to1988d.1998to2008e.TheOPECoilshockin1979andthemostrecentshocksfrom2002to2005andin2008accountfortheincreaseintherelativepriceofoilduringthoseperiods.2.a.Table4–10(1)(2)(3)(4)(5)(6)(7)(8)Nominal%ChangeM1(Dec.)M2(Dec.)GDP($inGDPinGDP($in%Change($in%ChangeYearbillions)DeflatorDeflatorbillions)inM1billions)inM219782,29545.83571,36665.3120.4119.219885,10475.77872,99427.539.346.219988,74796.51,0964,37826.945.686.2200814,265122.51,5968,154b.Ifthelong-rungrowthrateofrealGDPis3percentperyear,orabout34percentperdecade,andvelocitywereconstant,thequantitytheorywouldpredictthatπ=%ChangeinM–34%perdecade.IfweuseM1asourmeasureofthemoneysupply,thesimplequantitytheorypre-dicts10-yearinflationratesof86.4percentfrom1978to1988;5.3percentfrom1988to1998,and11.6percentfrom1998to2008.c.UsingM1,thequantitytheoryisafairlygoodpredictorofinflationinthefirstandthirddecadesandapoorpredictorinthemiddledecade.d.IfweuseM2asourmeasureofthemoneysupply,thesimplequantitytheorypre-dicts10-yearinflationratesof85.2percent,12.2percent,and52.2percentforthethreedecades,respectively.Itisafairlygoodpredictorforthefirsttwodecades,butnotforthemostrecentdecade.3.a.VforM2in1978=1.68;VforM2in2008=1.75;obviously,M2velocityhasrisenabit,contrarytotheassumptionofthesimplequantitytheory,butnotmuch.Chapter4MoneyandInflation205b.VforM1in1978=6.43,VforM1in2008=8.94;M1velocityhasrisenalot,con-trarytotheassumptionofthesimplequantitytheory.c.Evenifvelocitychanges,MV=PYandthe%changeinM+%changeinVapproximatelyequalsthe%changeinP+%changeinY.Thus,ifbothvelocityandrealGDPchangesteadilyovertime,%changeinP=%changeinM+%changeinY–%changeinV,andanyincreaseinthemoneysupplywillbeaccom-paniedbyanequalincreaseinthepricelevel.Problems11.a.Ifthedeficitwereeliminated,publicsavingwouldrise.Iftaxeswerecut,inthelongrunprivatesavingwouldalsorise.Thus,nationalsavingwouldrise.b.Inaclosedeconomy,theScurveshiftsright(assavingincreases),therealrateofinterestfalls,andtheamountofinvestmentincreasesalthoughtheinvestmentcurvedoesnotshift:GraphforProblem11(b)206AnswerstoSelectedStudentGuideProblemsCHAPTER5TheOpenEconomyI1=I2rr1r2Realinterestrate0Investment,SavingI,SS1S2c.GraphforProblems11(c)and11(d)d.TreatingtheUnitedStatesasasmallopeneconomy,weonceagainshifttheScurvetotherightasnationalsavingincreases.Therealinterestrate,however,remainsfixedatr*.Consequently,investmentdoesnotchange,butS–Iincreases.e.AstheS–Icurveshiftsrightbelow,theU.S.realexchangeratefallsandnetexportsrise.GraphforProblem11(e)Chapter5TheOpenEconomy207r*=2.5%(S–I)1(S–I)2NXS–I,NX–+0ε2ε1ε17.TheinitialequilibriumisrepresentedbypointsAinpanels(A),(B),and(C)below.GraphforProblem17ThereductionintaxesandgovernmentspendingwouldincreasenationalsavingandshifttheScurverighttoS2inpanel(A).TheI+CFcurvewouldnotshift,sothedomesticrealinterestratewouldfalltopointB.Consequently,thelevelofnetcapitaloutflowwouldriseinpanel(B).Sincenetcapitaloutflowequalsthetradesurplus,thelatterwouldalsorise,implyingadecreaseinthetradedeficit.AsNXrises,therealexchangeratewillfall.Asthedomesticrealinterestratefalls,investmentwillrise.DataQuestions1.a.Table5–8(1)(2)(3)(4)(5)(6)ExportsofImportsofNominalGoodsandExportsasGoodsandImportsasGDP($inServices%ofServices%ofYearbillions)($inbillions)NominalGDP($inbillions)NominalGDP19782,295186.98.1212.39.319936,657655.89.9720.910.8200814,2651,859.413.02,528.617.7208AnswerstoSelectedStudentGuideProblemsPanelanelBBABACFCFS,I+CFI+CFS1S2rrArBPanelCBANXNXCFrACFrBPAr0+–0+–εεAεBb.increased;morec.Table5–9(1)(2)(3)NetExportsofGoodsNetExportsasYearandServices($inbillions)%ofNominalGDP1978–25.4–1.11993–65.1–1.02008–669.2–4.7d.–25.4;–25.4e.–669.2;–669.23.a.TheWesternEuropeannaturalrateofunemploymentinthe1960swas2.5per-cent,comparedwiththeU.S.naturalrateinthetextbookof4.76percent.b.8percent6.a.E/POP=E/L×L/POP,wherePOP=thenoninstitutionalpopulation.b.E/POPindicatestheportionofthepopulationthathasajob.Inahealthyecono-my,thiswillbelarge.Furthermore,manyoftheunemployedmaynotreallywanttoworkatthejobsthatareavailabletothem.Whileitmaybedifficulttomeasuretrueunemploymentaccurately,itiseasiertomeasureEandPOP.c.Theunemploymentraterepresentstheportionofthosewhodesiretoworkwhocannotfindwork.Eveniftheemployment-to-populationratioishigh,ahighunemploymentratewillsignifyaneconomythatisproducingmuchlessthanitspotential.Furthermore,ifleisureisanormalgood,thegoalofsocietyshouldbealowemployment-to-populationratiocoupledwithalowunemploymentrate.DataQuestions1.a.Table6–2Labor-ForceParticipationRates(inpercent)(1)(2)(3)(4)MaleandFemaleYearTotalCivilianCivilianMalesCivilianFemales196859.680.141.6198865.976.256.6200866.073.059.5b.Thelabor-forceparticipationrateamongcivilianfemaleshasincreasedasmoremarriedwomenhaveenteredthelabormarket.Thelabor-forceparticipationrateamongcivilianmaleshasfallenbecauseofearlierretirementandgreaterdisabili-ty,amongotherreasons.Chapter6Unemployment209CHAPTER6Unemploymentc.RealGDPhasrisenbytheamountofextraoutputwomenproduceintheirnewjobs.“Totalproduction”doesnotriseasmuchasmeasuredrealGDPbecausethereductioninhouseholdproductionthatwasformerlyperformedbythesewomenmustbesubtractedfromtheextraoutputproducedinpaidemployment,especial-lybetween1968and1988.Ifweconsiderthefactthatmanyofthesewomennowpayotherstodosomeofthishouseholdproduction,thedifferencebetweenthechangeinrealGDPandthechangein“totalproduction”isevengreater.2.a.Themedianofagroupofnumbersisthe“middle”number.Halfofthenumbersaregreaterthanthemedian,andhalfarelessthanthemedian.Themeanoraverageisequaltothesumofallthenumbersdividedbythenumberofnumbers.b.Themediandurationofunemploymentin2008was9.4weeks.Themeandura-tionofunemploymentin2008was17.9weeks.c.UnemploymentintheUnitedStatesischaracterizedbymanyshortspellsandasmallernumberofverylongspells.Hence,themediandurationofunemploymentismuchsmallerthanthemeanduration.3.a.,b.,andc.Table6–3(1)(2)(3)(4)(5)InflationConventionalNewUnemploymentRateMiseryMiseryYearRate(YeartoYear)IndexIndex20064.6%3.2%7.811.020074.6%2.8%7.410.620085.8%3.8%9.613.7d.Economicsufferingincreasedmorerapidlyin2008usingthenewmiseryindex,andevenmoresoin2009.DataQuestions1.a.ApproximateAverageAnnualPercentageGrowthRatesofRealGDP1990–19992000–2008UnitedStates3.12.4Japan1.51.6Germany2.31.5China9.99.9India5.67.2Africa2.35.5b.Intheyear2038210AnswerstoSelectedStudentGuideProblemsCHAPTER7EconomicGrowthIProblems4.Theshort-runaggregatesupplycurvewouldshiftdownward,whiletheaggregatedemandcurvewouldbeunaffected.Outputwouldrise,andtheaggregatepricelevelwouldfall.DataQuestions1.a.Table9–4(1)(2)(3)19791982%Change(in1,000s)(in1,000s)1979–1982Civiliannoninstitutionalpopulation164,863172,2714.5Civilianlaborforce104,962110,2045.0Civilianemployment98,82499,5260.7Civilianunemployment6,13710,67874.0b.Duringrecessions,employmentgrowsbyasmallerratethanthelaborforce.Consequently,unemploymentgrowsbyamuchlargerratethaneitheremploy-mentorthelaborforce.Duringeconomicrecoveries,thereverseistrue.Thepopu-lationgrowsatamoreconstantrateovertime,althoughit,too,isaffectedbyeco-nomicconditionsinthelongrun.c.Theactualunemploymentratewouldeventuallyhaveequaled5.8percent.2.InApril2009,theunemploymentratewas8.9percent.Iftheunemploymentrateforallof2009was8.9percent,Okun’slawwouldpredictthattherealGDPwouldfallby3.2percent.Problems4.a.0.75b.GraphforProblem4(b)slopeofC=0.6;yintercept=20Chapter9IntroductiontoEconomicFluctuations211CHAPTER9IntroductiontoEconomicFluctuationsCHAPTER10AggregateDemandI20CCYIncome,output0ConsumptionslopeofPE=0.6;yintercept=800c.2,000d.0e.Thegovernment-purchasesmultiplieris2.5.WhenGrises,themultiplierissmallerthan1/(1–MPC)becauseanyincreaseinincomewillbeaccompaniedbyanincreaseintaxes.Hence,theincreaseindisposableincomeineachroundwillbesmallerthantheincreaseinincome.Alternatively,theslopeoftheplannedexpenditurecurvebecomesMPC(1–t),wheretequalstheincometaxrate.Hence,themultiplierbecomes1/[1–MPC(1–t)].6.a.PlannedinvestmentmightincreaseasYrises(leadingtothepositivelyslopedlinebelow)ifinvestmentdependsonprofitsorsalesexpectations(alongwithr)andeitherorbothoftheserisealongwithY.b.i.Theslopeoftheplanned-expenditurecurvewouldincrease.ii.Thegovernment-purchasesmultiplierwouldincrease.iii.TheIScurvewouldbeflatter,andtheLMcurvewouldbeunaffected.212AnswerstoSelectedStudentGuideProblemsPEPEYIncome,output0Plannedexpenditure8000YII'Income,outputIPlannedinvestmentDataQuestions1.Table10–7(1)(2)(3)(4)(5)(6)NominalM2inDecember%ChangeinGDPDeflatorRealM2%ChangeYear($inbillions)M2(2000=100)M2/PinM2/P19791,473.749.52,977.28.6–0.519801,599.854.02,962.69.70.319811,755.459.12,970.28.82.619821,910.162.73,046.411.37.119832,126.465.23,261.3TheLMcurveimpliesthatchangesintherealmoneysupplyaretheappropriatemeasuresofmonetaryconditions.Usingthismeasure,theFedpursuedmildlycontractionarymonetarypolicybetween1979and1980,neutralpolicybetween1980and1981,expansionarypolicybetween1981and1982,andveryexpansion-arypolicybetween1982and1983.Abettermeasuremightbechangesintherealmoneysupplyinexcessofthelong-rungrowthrateofnaturalGDPof3per-cent.Usingthismeasure,monetarypolicywascontractionaryduringthefirstthreeperiodsandexpansionaryinthefourth.Problems4.a.Thedeficitwouldfall.TheIScurvewouldshifttotheleft.GraphforProblem4(a)Asaresult,theinterestratewouldfall,butsowouldrealGDP.Thislastchangeiscontrarytosomeeconomists’predictions.Chapter10AggregateDemandI213CHAPTER11AggregateDemandIIr0r1r2LMIS2IS1RealinterestrateIncome,outputYY2Y1b.Ifexpansionarymonetarypolicyispursuedsimultaneously,theinterestrateandthedeficitwillstillfallandrealincomemayactuallyrise.GraphforProblem4(b)c.Inpart(a),theaggregatedemandcurveshiftsleft.Inpart(b),theaggregatedemandcurveshiftsrightifYrises.13.a.GraphforProblem13(a)b.Ifrisontheverticalaxis,theIScurvewillnotshiftinresponsetoachangeinexpectedinflation,buttheLMcurvewillshiftupwardby10percentagepoints.Consequently,iandYfallandrrises.Althoughthegraphisdifferentfromtheoneinthetextbookbecauserisnowontheverticalaxis,thechangestoY,i,andrarethesame.14.IfthemoneysupplyMincreasedastheinterestrateincreased,themoneysupplycurvewouldbeupwardsloping.214AnswerstoSelectedStudentGuideProblems0r2YIS1IS2Income,outputrRealinterestrateLM1LM2r1Y1Y2Income,outputAYISrr2r1Y1Y2LM1(πe=0)LM2(πe=–10)r1+100RealInterestRateGraphforProblem14Consequently,anincreaseinincomethatincreasesthedemandforrealmoneybalanceswouldincreasetheinterestrateandthemoneysupply.TheincreaseintheinterestratewouldbelessthanwhenMisindependentoftheinterestrate,resultinginaflatterLMcurve.DataQuestions1.a.Table11–1(1)(2)(3)(4)(5)(6)(7)RealGDP%M1GDP%inbillionsofChangeininDec.DeflatorRealM1ChangeinYear2000dollarsRealGDP($inbillions)(2000=100)(=M1/P)RealM119795,173.4381.849.5771.3–0.2–1.919805,161.7408.554.0756.52.5–2.319815,291.7436.759.1738.9–1.92.519825,189.3474.862.7757.3b.ThereductioninrealGDPwasmuchgreaterduringtheGreatDepression,eventhoughthereductioninrealmoneybalancesfrom1929to1933wassmallerthanduringthe1979–1981period.2.a.Table11–2(1)(2)(3)(4)RealGDP%InterestRateinbillionsofChangeinon10-YearU.S.Year2000dollarsRealGDPTreasurySecurities19602,501.84.1227.619653,191.14.28Chapter11AggregateDemandII215BABALMYM/Prr2r2‹r1CL1(Y=Y1)L2(Y2)(M/P)‹(M/P)Realmoneybalances0RealinterestrateCLM‹Y1Y2Income,output0Realinterestraterr2r2r1‹b.SincetheinterestrateremainedrelativelyconstantwhilerealGDProse,itmaybepresumedthatboththeLMandtheIScurvesshiftedtotherightandthatthehorizontalshiftwasthesameforbothcurves.Consequently,theFederalReservemusthaveincreasedthemoneysupplyduringthisperiod.DataQuestions1.a.andb.Table13–1(1)(2)(3)(4)(5)(6)RealGDPActualPredicted(billions%CivilianChangeinChangeinof2000ChangeinUnemploymentUnemploymentUnemploymentYeardollars)RealGDPRate(%)RateRate20019,890.74.71.6+1.1+0.7200210,048.85.82.5+0.2+0.25200310,301.06.03.6–0.5–0.3200410,675.95.52.9–0.4+0.05200510,989.55.1c.Okun’slawwasfairlyaccurateduringthisperiod.Problems6.a.Ifcapitalgainstaxesarereduced,theafter-taxreturntosavingwouldincrease.Thismightincreasetotalsaving,whichwouldspuradditionalinvestmentinaclosedeconomyoralargeopeneconomy.b.Acapitalgainstaxreductiononpastacquisitionswillincreasetheafter-taxreturnsonpastsavingratherthanfuturesaving.Thewealtheffectmightevenreducenewsaving.Consequently,therevenuelossesmightnotleadtoadditionalsavingandinvestment.c.Althoughtheconcentrationoftaxreductionsonnewacquisitionswouldsolvetheprobleminpart(b),itmightnotspuradditionalsavingandinvestmentasmuchasexpectedbecauseindividualsmightexpectthegovernmenttoincreasecapitalgainstaxesagaininthefutureoncetheirprojectsbecome“pastacquisitions.”216AnswerstoSelectedStudentGuideProblemsCHAPTER13AggregateSupplyandtheShort-RunTradeoffBetweenInflationandUnemploymentCHAPTER15StabilizationPolicyDataQuestions1.a.Table15–1(1)(2)(3)(4)(5)RealActualGDPRealGDPUnemploymentActualGrowthGrowthRateUnemploymentYearForecast(%)Rate(%)Forecast(%)Rate(%)2009–2.0________8.4________20102.2________8.8________b.TheactualGDPgrowthrateandunemploymentratewerenotknownwhenthisStudyGuidewenttopress.Problems4.Accordingtothetraditionalview,thefuturereductioningovernmentspendingwouldhavenoeffectonthesumofcurrentandexpectedfutureincome,currentconsumption,orcurrentprivatesaving.AccordingtotheRicardianview,afuturereductioningov-ernmentpurchaseswillbeaccompaniedbyanexpectedfuturereductionintaxes.Thiswillincreasethesumofcurrentandexpectedfuturedisposableincome,increasecur-rentconsumption,anddecreasecurrentprivatesaving.5.a.CountryA:$140billion;CountryB:$40billionb.CountryA:$0billion;CountryB:–$100billionc.CountryA:$2,000billion;CountryB:$1,900billiond.CountryA:$2,000billion;CountryB:$1,900/0.95=$2,000billione.$200+0.07($2,000)–$340=$0billioninbothcountries.f.understate;asthepricelevelfalls,therealvalueofoutstandinggovernmentdebtrises,butthisincreaseisnotincludedintheofficialdeficit.DataQuestions1.a.Table16–3(Datainbillionsof$)(1)(2)(3)(4)(5)TotalFederalTotalFederalOfficialGrossFederalFiscalGovernmentGovernmentFederalBudgetDebtHeldbyYearReceiptsOutlaysSurplusPublic(endofyear)20031,782.52,160.1–377.63,913.420041,880.32,293.0–412.74,295.520052,153.92,472.2–318.34,592.220062,407.32,655.4–248.24,829.020072,568.22,730.2–162.05,035.1Chapter16GovernmentDebt217CHAPTER16GovernmentDebtb.Table16–4(1)(2)(3)(4)(5)PriceGrossFederalDebtApproximateDeflatorforHeldbyPublic(end“True”FederalCalendarGDPPercentageofprecedingfiscalyear)BudgetSurplusYear(2000=100)Change($inbillions)($inbillions)2004109.53,913.4–287.53.22005113.04,295.5–176.53.32006116.74,592.2–124.22.72007119.84,829.0–50.92.32008122.55,035.1Problems4.a.C1=100;C2=125;S=20b.C1=93.33;C2=140;S=26.676.a.Acountrywitharapidlyincreasingpopulationwillhaveahighersavingrate(andaloweraggregateAPC)thanacountrywithasteadypopulationbecauseeachsuc-cessivegenerationofworkers,whodothesaving,willbelargerthantheprecedinggenerationofworkers.b.AcountrywitharapidlygrowingrealGDPpercapitawillhaveahighersavingrate(andaloweraggregateAPC)thanacountrywithastagnanteconomy.Eachsuccessivegenerationofworkersinthegrowingeconomyearnsmoreperperson(andhencesavesmoreperperson)thanwhatthecurrentgenerationofretireesearned(andsaved)whenitwasworkingandfromwhichitisnowdissaving.10.Afterthelegislationwaspassed,allthefuturetaxcutsbecameexpected.Accordingtothistheory,people’spermanentincomesrose(and,hence,theirconsumptionrose)onlyinthefirstyear,1981,whichwouldbetheonlyyearinwhichconsumptionchangedasaresultofthetaxchangesunlesspeoplehadborrowingconstraints.DataQuestions1.a.Table17–5(1)(2)(3)(4)RealRealConsumptionDisposableAverageExpendituresIncomePropensitytoYear($inbillions)($inbillions)Consume(APC)19672,185.02,475.90.88319874,369.84,874.50.89620078,252.88,664.00.955218AnswerstoSelectedStudentGuideProblemsCHAPTER17Consumptionb.Percentagechangeinrealdisposableincomeequals249.1percent;percentagechangeinAPCis8.2percent.c.Overlongperiodsoftime,theAPCisrelativelyconstant.2.a.Table17–6(1)(2)(3)(4)ConsumptionDisposableAverageExpendituresIncomePropensitytoYear($inbillions)($inbillions)Consume(APC)1967507.8575.30.8831968558.0625.00.8931970648.5735.70.881b.In1968,Congresspassedatemporarytaxsurcharge.Thisdidnothaveasignifi-canteffectonpeople'spermanentincomes,sotheymaintainedtheirpreviouslev-elsofconsumptionbyreducingtheircurrentsavingandtemporarilyincreasingtheirAPC.Problems9.a.Aninvestmenttaxcreditof8percentallowsfirmstodeduct8percentoftheirinvestmentexpendituresfromtheirtaxes.b.Thecostofcapitaldeclinesateachrealinterestrate.Consequently,theIScurveshiftstotheright.TheLMcurvedoesnotshift.c.i.TheIScurveshiftstotherightforthesamereasonasinpart(b).TheLMcurvedoesnotshift.ii.Astherealdomesticinterestraterises,U.S.netcapitaloutflowfalls.iii.TheU.S.tradesurplusalsofalls.Consequently,