When the Fed unexpectedly reduces the money supply, it will cause a decrease in aggregate demand because
a. real interest rates will rise, lowering business investment and consumer spending.
b. the dollar will depreciate on the foreign exchange market, leading to an increase in net exports.
c. lower interest rates will cause the value of assets (for example, stocks) to rise.
d. the national debt will increase, causing consumers to reduce their spending.
A
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Why do financial markets depend on accurate accounting and disclosure practices?
What will be an ideal response?
If short-run equilibrium output equals 50,000 and potential output (Y*) equals 45,000, then this economy has a(n) ________ gap that can be closed by ________.
A. recessionary; increasing government purchases B. expansionary; increasing transfer payments C. expansionary; decreasing government purchases D. expansionary; decreasing taxes