The Federal Reserve increases interest rates when it wants to reduce aggregate demand to fight inflation. How do increases in the interest rate reduce aggregate demand?
What will be an ideal response?
Increases in interest rates reduce planned investment. The decrease in investment reduces equilibrium output by a multiple amount due to the multiplier effect. Also, increases in interest rates increase the value of the dollar, reducing net exports, which reduce aggregate demand and equilibrium output by a multiple amount.
Economics
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The employment-to-population ratio equals
A) (labor force)/(working-age population) × 100. B) (number of people employed)/(labor force) × 100. C) (number of people with full-time jobs)/(labor force) × 100. D) (number of people employed)/(working-age population) × 100.
Economics
The study of economics arises due to
A) resources. B) greed. C) money. D) scarcity.
Economics