This preview shows page 1. Sign up to view the full content.
Unformatted text preview: final purchases at fixed total income. One wealth effect lower output prices make money assets worth more real goods and services; two substitution effects: lower output prices imply lower real interest rate [to induce acceptance of the now larger real money supply], leading to greater demand for interest-sensitive purchases [investment, consumer durables]; and lower US output prices increase foreign purchases [X] and reduce imports [M]. f. AE slopes up because when real GDP rises, so does disposable income, so planned consumption increases. TRUE...
View Full Document
This note was uploaded on 05/22/2011 for the course ECO 2013 taught by Professor Denslow during the Spring '05 term at University of Florida.
- Spring '05