Ent Steenson w ovguasiss 1) The bheues of baadity preforeme ss tayoty> theonh of haw the Imberest 15 determined. According — tothe theory, tha aggreget demand curves spe daunward becavse + — _ 9 higher price. level causes enorey derrand. a0. 7 igher_maney demand leads_ta_a higher interest Cute A. hiyher interest rete reWuces bho Quantvty of giots ands —The pete WL hes negate selabienshp with £0 cyortity 8}. geeds_and sees denne of 2) A decrease_in tho monty S9PPIY shifts the mony Supply Curve_to the left : The ealbrivm intecest fate voit rvso.The higher interest rob reduces consumption and investment , 50 agregat demand falls: | Thus, the aggeyat - demand curve shifts to the left 2) the savecrent_stends $3 mi bikon te by pale coe, aggreyet demond might sacteaso_by more thon +3 bitten becouse of the muthpiey multiplier effect on_agyfeget_demand Aggtegat demand ought Increase by less thon. $3 bilan becouse of the crowding - out effect_on.Oggreyet. demand _ 414 Ressimism sweeps the county, havsehulds redice Cinsumption, spending. aod 4:ms Fedices Investments So Oggteqat demand fos. It the fe) wents to stabilize AD, It must increase the > monty supplies, fedveng te, whieh will induce howeholls to save less and spend more_uad_uill Cacoutage firms — et. both of which wi! increose ADJ the Fal does nat _inceeos —Could_incteose Get. purchases or reduces TeX to mcreose AD_ 5 2_the money suPPly, Cong S) Goverment poices thet act oS Gutamatic stebizer inchde the tox System _ond-goverment__ Spending theough the ysomplayment= benosit system. TH tox system act 2S_an_ automatic Stabiiter_ ‘because _when_incomes are high, Pevple pay more in taxes, Se they Con't spend as mvch. when Incomes etowis Se-ore_baxes ;-thvt, Beale con spent_mora.The cemiés thal spending os partly stabiize. Pliyment. benefit system acts aS cn automatic. Stabilizer because IN -fecorsions the gaver ment rant z irancomes. do not_fatt_os ~fich and_thus there spending ue natfol_as-much: Scanned with CamScanner