Describe the chain of events that are likely to unfold when the government reduces net
taxes. Explain your answer in terms of its impact on aggregate output, the demand for
money, the interest rate and planned investment
Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of an
expansionary monetary policy.
Explain how aggregate quantity-demanded falls when the price level increases and the
impact this has on interest rates and aggregate output.
Discuss how the consumption link provides another explanation for the downward-sloping
aggregate demand curve.