The aggregate demand curve is likely to shift downward because of a(n):
a. increase in a household's wealth.
b. decrease in tax rates
c. decrease in government spending.
d. increase in consumer spending.
c
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Tony spends $36 per month on cookies. For him, chocolate chip cookies and peanut butter cookies are perfect substitutes. Chocolate chip cookies are $4 per dozen and peanut butter cookies are $3 per dozen
How many dozen of each type of cookie will Tony buy in a given month if he wants to maximize his utility?
If, while you are holding a coupon bond, its market price falls, you can be sure that
A) the coupon payment you are receiving must have been reduced. B) the interest rate on other similar bonds must have fallen. C) the interest rate on other similar bonds must have risen. D) the par value of the bond must have declined.
If the Fed wants to lower the interest rate, it will
a. buy bonds and decrease the money supply. b. buy bonds and increase the money supply. c. sell bonds and decrease the money supply. d. sell bonds and increase the money supply. e. sell bonds and decrease money demand.
Government spending affects aggregate demand directly, and tax changes affect aggregate demand indirectly. Therefore, changes in
a. taxes are ineffective in changing aggregate demand. b. government spending affect aggregate demand more quickly than changes in taxes. c. taxes are virtually useless as a stabilization tool. d. government spending should be used with great caution.