Investor optimism and pessimism matter great deal

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Consumer and investor optimism and pessimism matter a great deal in the economy. Suppose that survey measures of consumer confidence indicate a wave of pessimism is sweeping the country.

If policymakers do nothing, what will happen to aggregate demand? What should the Federal Reserve do if it wants to stabilize aggregate demand? If the Federal Reserve does nothing, what do you think might Congress (fiscal policy) do to stabilize aggregate demand? Why do you think consumer and investor confidence affect AD and hence the economy?

Reference no: EM13860859

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