In each of the situations described, state which component of aggregate demand (C, I, G, or NX) of the United States is affected and whether aggregate demand will increase or decrease as a result.
1. The recent hike in the federal-funds rate target increases the value of dollars relative to other currencies.
2. Uncertainty about how the presidential primaries and general election will play out cause firms to scale back and delay some of their planned projects.
3. The Chinese economy grows at a slower pace that it has in recent years.
4. A decline in the value of stocks decreases the wealth of many households.
5. Breakthroughs in additive manufacturing (i.e., 3D printing) increase productivity for a wide variety of manufacturing firms.
6. With a lower unemployment rate, households are increasingly confident about where the economy is headed.
7. Britain’s minor renegotiations with the European Union conclude, leading to more certainty and a slight increase in economic growth in Europe.
8. As controlling the size of the deficit recedes as an issue of political importance, Congress and the President increase federal spending in an election year.