In the IS model,assuming that the real interest rate does not change,an increase in ________ leads to an increase in equilibrium saving by households.
A)autonomous consumption
B)taxes
C)financial frictions
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

In the IS model, an increase in autonomous consumption, taxes, or financial frictions does not lead to an increase in equilibrium saving by households. Autonomous consumption decreases saving as it increases consumption directly. Higher taxes reduce disposable income, potentially reducing saving. Financial frictions can make saving or investing more costly or difficult, not necessarily increasing saving.

In the IS Model,assuming That the Real Interest Rate Does