1. Why would aggregate demand and output be reduced if Congress tries to balance the budget by cutting government spending?

2. Why would the Fed increase MS and reduce r to increase aggregate demand if Congress tries to balance the budget by cutting government spending to stabilize output?

3. Why would the aggregate demand increase and raise the output above its natural rate if the stock market boomed and increased household wealth?

4. Why would the Fed reduce MS and increase r to reduce aggregate demand if the stock market booms and increases household wealth to stabilize output?

5.Why would the aggregate supply be reduced, causing output to fall, if a war breaks out in the Middle East, causing oil prices to soar?

6. Why would the Fed increase the MS and reduce r to increase aggregate demand to stabilize output?

interest rate = r Money supply = MS