Use the money market to explain the interest-rate effect and its relation to the slope of the aggregate demand curve
When the price level falls, people need less money for their transactions. The decreased demand for money leads to a decrease in interest rates as money demand shifts left. Lower interest rates encourage consumption and investment spending. Thus, a decrease in the price level raises the aggregate quantity of goods and services demanded.
You might also like to view...
The change spawned by the microchip and the Internet which has also enhanced the acquisition, analysis, and transmission of information is known as _____
A) the Information Revolution. B) the Innovation Revolution. C) the Manufacturing Revolution. D) the Industrial Revolution. E) the Agricultural Revolution.
One benefit of a negative income tax is that it would increase work incentives.
Answer the following statement true (T) or false (F)
Assume that Jane has limited wealth to invest in two assets both of which promise her returns worth $3,000 after two years. The first is a bank deposit assuring an interest of 10 percent per annum and the second is a private bond with an interest rate of 8 percent per annum. Which of the two would require a low initial investment and of what amount?
a. The bond requiring an initial investment worth $2,564 . b. The bank deposit requiring an initial investment worth $2,479. c. The bond requiring an initial investment worth $2,479. d. The bank deposit requiring an initial investment worth $2,564.
What did China create to allow more international trade?
A) Special economic zones B) Foreign exchange centers C) More open and transparent government meetings D) New educational efforts