On june 5, 2003, the european central bank acted to decrease the short-term interest rate by half a percentage point to 2 percent. the bank's president at the time, willem duisenberg, suggested that the bank could reduce rates further in the future. the likely impacts of such a rate cut were a. an increase in planned aggregate expenditure, an increase in aggregate income and output, and an increase in consumption. b. an increase in planned aggregate expenditure, an increase in consumption, and an ambiguous effect on aggregate income and output. c. a decrease in planned aggregate expenditure, an increase in consumption, and a decrease in aggregate income and output. d. an increase in planned aggregate expenditure, an increase in aggregate income and output, but an ambiguous effect on consumption.

The correct answer is option A.

Explanation:

A decrease in the interest rate would lead to increase in the capital investment as the cost of borrowing gets reduced. With the increase in investment more output would be produced. In order to increase output more inputs will be hired, leading to increase in income. This increase in income would further contribute in increasing the consumption level.

So, we can conclude that because of decrease in interest rate, planned aggregate expenditure, income, output and consumption will increase.

a progressive tax is a tax that imposes a lower tax rate on low-income earners compared to those with a higher income, making it based on the taxpayer's ability to pay. that means it takes a bigger percentage from high income earners than it does from low income people.

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