List of the Events

a. People become pessimistic about future economic condition.

b. People's wealth increases as a result of stock market boom.
c. Uncertain with future economic condition, firms become pessimistic.
d. Relaxation in public administrative procedures encourages firms' investment.
e. Congress passed the law leading to a decrease in taxes on people's income.
f. Government decreases its spending on highway construction.
g. The world interest rate increases.
h. Promotion of free trade results in a larger international market for the country's
produced goods.
i. Less foreigners want to purchase the country's produced goods.
j. Western fashion become more popular to the youth in the country.
Exercise 1
Consider a closed economy in the long run. For each of the events from (a) to (f),
explain what happens to the real interest rate and level of investment in the economy.
(Suggest: Use the loanable funds market for a closed economy)