Author Question: In September of 2007, the Federal Reserve Board Open Market Committee voted to lower interest rates ... (Read 66 times)

Frost2351 · **on:** Jun 29, 2018

In September of 2007, the Federal Reserve Board Open Market Committee voted to lower interest rates for the first time that year. Explain how lower interest rates affect the aggregate demand curve.

What will be an ideal response?

Question 2

Refer to Figure 15-16. Which of the following would be true if government regulators require the natural monopoly to produce at the economically efficient output level?

A) This results in a misallocation of resources.
B) The firm will sustain persistent losses and will not continue in business in the long run.
C) The marginal cost of producing the last unit sold exceeds the marginal benefit.
D) The firm will break even.

kaykay69 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Reducing the interest rate lowers the cost of borrowing to firms and to households. As a result, both firms and households will increase expenditures. This increase in expenditures will shift the aggregate demand curve to the right.

Answer to Question 2

B