Explain how each of the following factors would influence aggregate demand in the United States. Be sure to explain which component of aggregate demand would be affected
a. a stock market crash
b. an increase in the personal income tax rate
c. a decrease in the real interest rate
d. an increase in government purchases
e. a decline in income in Canada
a. A stock market crash would decrease wealth, causing consumption, and thus aggregate demand, to decline.
b. An increase in the personal income tax rate would decrease consumers' disposable income, lowering consumption and aggregate demand.
c. A decrease in the real interest rate would increase consumer purchases of durable goods and business purchases of investment goods, causing aggregate demand to increase.
d. An increase in government purchases would directly increase aggregate demand.
e. A decline in income in Canada would cause the demand for U.S. exports to fall, causing a decline in net exports and a decline in aggregate demand.
You might also like to view...
Refer to the Article Summary. In 2015, the European Union initiated the BRRD program, where the burden of bailing out troubled banks is being placed on bank creditors, shareholders, and possibly depositors
If this program were to confiscate funds from bank deposits to assist troubled banks, the possibility of a bank run, a situation in which ________, would likely increase. A) a majority of the shareholders in a bank decide to sell off all their shares of stock. B) many depositors simultaneously decide to withdraw money from a bank. C) a bank stops paying interest on all of its interest-bearing accounts. D) a majority of the bank's loans go into default all at once.
The main source of revenue for the U.S. federal government is
a. personal income taxes b. corporate income taxes c. sales taxes d. borrowing on financial markets e. revenue from the sale of government goods and services
Investors lower the risk of losing their investment by investing in one large firm, rather than investing in many small firms
a. True b. False Indicate whether the statement is true or false
If the interest rate were 10 percent, how much would people be willing to pay for a stock that was certain to yield a $2 per share stream of net earnings continuously in the future?
a. $2 b. $10 c. $20 d. $100