Chapter 12, Application Question 1 in the textbook. Use the aggregate expenditure model developed in this chapter to explain the following statements:...

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.