Building the is–lm mode

in the graphs below, indicate the effects of the policy changes described, assuming a marginal propensity to consume (mpc) of 2/3. in each case, first shift the planned expenditure curve to its correct position. then move point a to the new equilibrium to indicate the new level of output (y). be sure to use the appropriate multiplier formula, depending on whether the change is a change in spending or a change in taxes.

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the answer is "b.the increased supply will create a surplus. "

the essential thought behind price controls is straightforward - utilize the power of law to modify the equilibrium of a market. for instance, the legislature may choose that the steel business needs to survive, and in this way pass a law to set a value floor on steel. this implies all steel sold must offer at or over the floor value, which must be set over the equilibrium cost for it to have any impact. the switch could likewise happen - the administration can choose that steel is excessively costly and set a value roof underneath its equilibrium value, with the goal that all steel must be sold at or beneath that ceiling.