Questions:
1.Explain how the aggregate expenditure function shifts in response to the changes in each of the following variables: 1- The real interest rate increases
2-Consumer confidence decreases
3-Higher taxes imposed on corporate profits
4-The economies in the rest of the world go into recession.
2.Use the provided information to answer the questions below: Required Reserve Ratio; rr= 0.2 Currency deposit Ratio; c= 0.5 Excess Reserve Ratio; e=0.15 1- What is the simple deposit multiplier? 2-What is the money multiplier? 3- Explain why the money multiplier differs from the simple deposit multiplier.
3.Using the CPI measure of the price level, which is 100 in the base year of 2004, calculate the annual inflation rates for
(a) 2005, when the index is 103.7.
(b) 2006, when the index is 105.5.
(c) 2007, when the index is 107.7.