PRINCIPLES OF MACROECONOMICSQUIZ #5 ANSWERS – COVERING CHAPTERS 12-141.Describe the chain of events that are likely to unfold when the government increasesspending. Explain your answer in terms of its impact on aggregate output, the demandfor money, the interest rate and planned investment. What is the crowding out affect?How can it be fixed?
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2.Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of anexpansionary monetary policy.
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3.Explain how aggregate quantity-demanded falls when the price level increases and theimpact this has on interest rates and aggregate output.
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4.Discuss how the consumption link provides another explanation for the downward-slopingaggregate demand curve.
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