Pearson eText Macroeconomics -- Access Card
Pearson eText Macroeconomics -- Access Card
7th Edition
ISBN: 9780136850014
Author: Hubbard, Glenn, O'Brien, Anthony
Publisher: PEARSON
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Chapter 15, Problem 15.3.1RQ
To determine

The effect of increase in the interest rate on the components of aggregate demand.

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Why do higher interest rates reduce aggregate demand?
Draw an aggregate demand and supply graph to show the effects of a decrease in interest rates in the short run and long run
Suppose government spending increases. Would the effect on aggregate demand be larger if the Federal Reserve held the money supply constant in response or if the Fed were committed to maintaining a fixed interest rate? Explain.
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