Describe how a central bank can increase aggregate demand by influencing expectations
What will be an ideal response?
When households and businesses expect interest rates to remain low, they are more willing to spend now and, even, to borrow, knowing that they will earn little on saving and be able to borrow in the future, at low cost, if they so choose. This willingness to spend and borrow, combined with an increase in the money supply by increasing bank deposits, will increase aggregate demand, so long as the banks can find suitable borrowers.
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The law of increasing costs mean that when an economy increases the production of one item-
What will be an ideal response?
Autoworkers negotiate a wage increase. How does this change affect the supply curve of? cars?
A) It shifts the supply curve leftward. B) It shifts the supply curve rightward. C) It does not shift the supply curve or create a movement along it. D) The supply curve will shift but there is not enough information to tell if the change shifts the supply curve rightward, leftward, or not at all. E) It creates a movement downward along the supply curve.