Question 10 5 pts The AA curve has a negative slope under normal circumstances because 7 liquidity trap because ______ . W , and is at in a 0 increases in income lead to a rise in the demand for money and therefore a rise in the interest rate that triggers appreciation: the interest rate is zero and unaffected by changes in income, hence, so is the exchange rate. 0 increases in debt lead to a rise in the interest rate that triggers appreciation; the interest rate is zero and unaffected by monetary policy, hence, so is the exchange rate. 0 decreases in income lead to a fall in the demand for money and therefore a fall in the interest rate that triggers depreciation: the interest rate is zero and not affected by monetary policy, hence, the exchange rate falls. 0 increases in income lead to demand for money and therefore a fall in the interest rate that triggers depreciation: the interest rate is zero and unaffected by monetary policy, hence, so is the exchange rate. Long run monetary neutrality is an important concept in macroeconomics. It refers to the fact that {even permanent} monetary expansions do not have permanent effects on output. In the long run, only prices are affected. 0 True 0 False The point of intersection between AA and DD curve denotes O simultaneous equilibrium in the goods and financial markets, since the negatively sloped DD curve collects all the combinations of Y and E that are equilibria in the goods market, and the positively sloped AA curve collects all the combinations of Y and E that are equilibria in the financial market. O simultaneous equilibrium in the goods and financial markets, since the positively sloped DD curve collects all the combinations of Y and E that are equilibria in the goods market, and the negatively sloped AA curve collects all the combinations of Y and E that are equilibria in the financial market. O simultaneous disequilibrium in the goods and financial markets, since the positively sloped DD curve collects all the combinations of Y and E that are equilibria in the goods market, and the negatively sloped AA curve collects all the combinations of Y and E that are equilibria in the financial market. O simultaneous equilibrium in the goods and financial markets, since the positively sloped DD curve collects all the combinations of Y and E that are equilibria in the financial market, and the negatively sloped AA curve collects all the combinations of Y and E that are equilibria in the goods market