ECO 372 Week 4 participation Principles of Macroeconomics, Ch. 21: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Consider the following as you read:

1. Consider the theory of liquidity preference. How does it help explain the downward slope of the aggregate-demand curve?
2. Be prepared to give an example of a government policy that acts as an automatic stabilizer. Explain why the policy has this effect.