What are the major factors that determine investment, and what impact does each have on aggregate demand?
Important factors that determine investment behavior are optimism, profits, interest rates, capital stock utilization rates, and inventories. Changes that increase investment lead to an increase in aggregate demand. Changes that decrease investment expenditures decrease aggregate demand.
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Do policies that alter the distribution of income also entail a change in property rights?
A) It is impossible to tell because of the uncertainty such policies create. B) Not if they are confined to changing relative prices. C) Not if they redistribute income without confiscating anyone's wealth. D) They do so necessarily.
Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is 2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above potential real GDP
If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals A) 4 percent. B) 6 percent. C) 8 percent. D) 10 percent.