Which of the following explain the change in aggregate demand you indicated above? Check all that apply. a)The currency falls relative to other currencies. b)Consumption expenditures on durable goods rise. c)Net exports fall. d)Investment decreases.
Which of the following explain the change in aggregate demand you indicated above? Check all that apply. a)The currency falls relative to other currencies. b)Consumption expenditures on durable goods rise. c)Net exports fall. d)Investment decreases.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
This problem looks at typical transmission mechanisms as a result of central bank policy.
Suppose the central bank of as country expects the rate of inflation to soon be under target. Use the following table to indicate the action the central bank will take, and how this action will affect the economy.
|
Central Bank's Action
|
Increase
|
Decrease
|
|
|---|---|---|---|
| Target Overnight Rate |
|
|
|
Effect on the Economy
|
Increase
|
Decrease
|
|
|---|---|---|---|
| Other Interest Rates |
|
|
|
| Aggregate Demand |
|
|
|
| Real GDP |
|
|
|
| Employment |
|
|
|
| Inflation |
|
|
a)The currency falls relative to other currencies.
b)Consumption expenditures on durable goods rise.
c)Net exports fall.
d)Investment decreases.
The core inflation rate/ unemplyment rate is a major indicator that helps central banks assess the future rate of inflation.
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