1. Use the aggregate expenditure model developed in this chapter to explain the following statements:

a. Coming amid continued turmoil in the financial and credit markets, the report sent stocks lower, with the Dow Jones Industrial Average falling 146.70 points Friday to close at 11,893.69.

b. Administration officials said they were confident conditions would improve as tax rebates that are part of the recent $152 billion economic-stimulus package begin to reach consumers.

c. The Fed is expected to cut interest rates again to prop up the economy.