3. Explain how each of the following will affect aggregate demand. In each case, draw a diagram to show the effect on the aggregate demand curve. (a) Negative economic indicators cause firms to become pessimistic about the future of the economy. (b) Banks become complacent and begin taking on riskier business loans at lower interest rates. (c) The government passes legislation that increases the rate of corporate taxes. (d) Inflation leads the central bank to increase the base interest rate.
3. Explain how each of the following will affect aggregate demand. In each case, draw a diagram to show the effect on the aggregate demand curve. (a) Negative economic indicators cause firms to become pessimistic about the future of the economy. (b) Banks become complacent and begin taking on riskier business loans at lower interest rates. (c) The government passes legislation that increases the rate of corporate taxes. (d) Inflation leads the central bank to increase the base interest rate.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter23: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 3CQQ
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