36. If there is a reduction in aggregate demand below potential output (YF), in the Keynesian model:

layoffs and reductions in output will occur

shortages will develop in resource markets

there will be an increase in the price level

interest rates will increase to restore spending

37. Classical economists of the 1930s did not believe that:

supply creates its own demand as explained by Say's Law

wages adjust in labor markets so that the economy returns to full employment on its own

laissez-fair is the appropriate economic policy for the government

a lack of aggregate spending leads to persistent cuts in output, layoffs, and a recession

38. Assume that analysts in financial markets observe the following actions:

• the Federal Reserve is raising the interest rate it pays on banks' reserves
• the Congress passes a tax increase that the President signs

Together these moves indicate that policy makers are attempting to:

Prevent inflation

Promote stronger growth in GDP

Raise aggregate demand

Lower unemployment

NO EXPLANATION