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...
