Chapter 12, Application Question 1 in the textbook.
1. Use the aggregate expenditure model developed in
this chapter to explain the following statements:
a. Coming amid continued turmoil in the financial
and credit markets, the report sent stocks
lower, with the Dow Jones Industrial Average
falling 146.70 points Friday to close at 11,893.69.
b. Administration officials said they were confident
conditions would improve as tax rebates
that are part of the recent $152 billion economicstimulus
package begin to reach consumers.
c. The Fed is expected to cut interest rates again
to prop up the economy.