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In 2009, the U.S. aggregate real income, Y, dropped sharply. We want to figure out what factors may have
caused the decline. Assume that the markets for money and for goods and services were both in equilibrium at all times. We know that the LM curve shifted downward due to a large increase in money supply. Which one of the following factors could have caused the decrease in income in that situation?
a.A temporary decrease in net taxes.
b.An increase in the expected return on investment.
c.A temporary decrease in the domestic price level.
d.A temporary increase in the domestic nominal interest rate.
e.A temporary decline in private consumption due to the decline in real wealth.
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