In September of 2007, the Federal Reserve Board Open Market Committee voted to lower interest rates for the first time that year. Explain how lower interest rates affect the aggregate demand curve
What will be an ideal response?
Reducing the interest rate lowers the cost of borrowing to firms and to households. As a result, both firms and households will increase expenditures. This increase in expenditures will shift the aggregate demand curve to the right.
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The principle of minimum differentiation
A) results in political parties proposing very similar or possibly identical policies. B) refers to the tendency of competitors to make themselves different in order appeal to the maximum number of clients or voters. C) explains why Burger King, Wendy's, and other fast food restaurants tend to locate far away from each other. D) None of the above answers are correct.
Which of the following measures gives the earliest warning of increasing inflation?
A) the Consumer Price Index B) the Producer Price Index C) the Personal Consumption Expenditure Index D) All of these should signal the same short-run inflation.