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1) During recessions which type of spending falls? a
1) During recessions which type of spending falls?
| a. |
consumption and investment |
|
| b. |
investment but not consumption |
|
| c. |
consumption but not investment |
|
| d. |
neither consumption nor investment |
2) Which of the following shifts aggregate demand to the right?
| a. |
Congress reduces purchases of new weapons systems. |
|
| b. |
The Fed buys bonds in the open market. |
|
| c. |
The price level falls. |
|
| d. |
Net exports fall. |
Expert Solution
Answer
1. Option A is correct
During recession consumption and investment spendings are falls.
Because
during recession from will be producing less and therefore will need fewer workers. People tend to save money because there is a fall in confidence.if people expect to be made unemployed then you don't want to spend and borrow saving become more attractive.
2. Option b is correct
The fed buys bonds in the open market.
Because
the aggregate demand curve to the right as the component of aggregate demand that is consumption spending investment spending government spending and spending on exports imports rise.
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