When the Fed increases the money supply to lower the federal funds rate, will the cost of capital to U. S. companies be reduced? Explain how the segmented markets theory regarding the term structure of interest rates (as explained in Chapter 3) could influence the degree to which the Fed’s monetary policy affects long-term interest rates.

Which of the statements best describes why the aggregate demand curve is downward sloping? an increase in the aggregate price level causes consumer and investment spending to fall, because consumer purchasing power decreases and money demand increases. as the aggregate price level increases, consumer expectations about the future change. as the aggregate price level decreases, the stock of existing physical capital increases. as a good's price increases, holding all else constant, the good's quantity demanded decreases.