26. Suppose the economy is experiencing stagflation. An observer of current events in the economy would expect to see:

greater use of dollars that are backed by gold

an increase in aggregate demand to reduce inflation

a reduction in unemployment in the labor market

a decline in real GDP

27. Suppose the aggregate expenditure function can be expressed as AE=20000 + .9Y. If national income increases by 800, by how much will aggregate expenditures change?

720

2000

80

800

28. Suppose GDP growth is above its target rate and inflation is also above its target rate. According to the Taylor Rule for monetary policy, we should expect the Federal Reserve to:

raise taxes

lower taxes

lower the Fed Funds Rate

raise the Fed Funds Rate