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Explain (making clear whether your analysis is in real or nominal terms) how each of the following events will affect the components of total wealth. (a) A reduction in the demand for residential investment. (b) A permanent decrease in income taxes.

Briefly explain how each of the following events will affect current stock (i.e. equity or share) prices. (a) Financial markets expect a future tightening of monetary policy will increase future interest rates (b) Financial markets expect a sustained expansion in economic activity. I am...