In September of 2007,the Federal Reserve Board Open Market Committee

question 228

Essay

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.

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Definitions:

Labor Market

The input/factor market in which households supply work for wages to firms that demand labor.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute cheaper goods for more expensive ones.

Wage Decrease

A reduction in the pay rate of a worker or a group of workers.

Labor Supply

The total hours that workers are willing and available to work at a given wage rate, within a specific labor market.