Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 27, Problem 3.1P
To determine
Identify the effects of decreases in the oil price level on aggregate price level and real GDP.
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Suppose a wave of negative “ animal spirits” overruns the economy, and people become pessimistic about the future.What happens to aggregate demand? If the Fed wants to stabilize aggregate demand, how should it alter the money supply? If it does this, what happens to the interest rate? Why might the Fed choose not to respond in this way?
Suppose that changes in bank regulations expand the availability of credit cards to that people can hold less cash.
How does this event affect the demand for money?
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If the Fed wants to keep this price level stable, what should it do?
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Principles of Economics (12th Edition)
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