Suppose that the central bank increases interest rates in an economy. How would this affect aggregate demand and inflation?
A) Aggregate demand would fall and inflation would rise.
B) Aggregate demand would fall and inflation would fall.
C) Aggregate demand would rise and inflation would rise.
D) Aggregate demand would rise and inflation would fall.
Answer: B) Aggregate demand would fall and inflation would fall.
Economics
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Return to the case of Jan, the hyperbolic discounter from the previous question. What values of B and C will lead her to be consistent with a plan not to undertake the action?
a. C < B < 2C. b. B < C. c. B > 2C. d. B < C < 2B.
Economics
According to Keynes, what is the most important determinant of households' spending on goods and services?
a. The price level. b. The interest rate. c. Autonomous consumption. d. Disposable income.
Economics