ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Which of the following is not a reason for the downward slope of the aggregate demand curve?
Government spending effect
Interest-rate effect
Real balances effect
Net exports effect
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- In the Aggregate Demand – Aggregate Supply Model, one reason for the downward slope of the Aggregate Demand curve is: at full employment, a rise in demand does not produce a rise in output O a fall in the price level increases interest rates making exports less competitive a fall in the Australian price level makes Australian-produced goods more internationally competitive and imports rise a rise in the price level reduces the real value of income, leading to a fall in consumption expenditurearrow_forwardWhy do the aggregate expenditure function and the aggregate demand curve both shift upward at the same time?arrow_forwardhelparrow_forward
- Which of the following is not a component of the aggregate demand curve?a.Government spending(G)b.Investment(I)c.Consumption(C)d.Net Exports(X-M)e.Savingarrow_forwardThe following graph shows an aggregate demand (AD) curve and a short-run aggregate supply (SRAS) curve for an economy. Suppose the economy is initially in a short-run equilibrium at PE, and Real GDP is 25trillion. At some point, the economy experiences a decrease in wage rates. Adjust the following graph to show the effect of a decrease in wage rates on the economy. Price Level 0 5 10 I | 1 15 20 25 30 35 Real GDP (Trillions Dollars) SRAS AD 40 45 50 AD SRASarrow_forwardFor each of the following, identify whether the aggregate demand (AD) or short run aggregate supply (SAS) curve moves, and the direction of the move. (a) A decrease in government spending (b) An increase in wagesarrow_forward
- The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for the United States in 1941. Shift one of the curves on the following graph to illustrate the effect of increased U.S. government spending during World War II.arrow_forwardWhat is included in U.S. aggregate demand? all spending by households and firms in the United States O all spending by the U.S. government. all spending by everyone living in the United States all spending by foreigners in the United States all spending by consumers, firms, the government, and foreigners who buy U.S.- produced goodsarrow_forwardConsider a macro-economy that was initially at equilibrium. Using an aggregate demand and aggregate supply diagram model of the economy, graphically illustrate and discuss the short-run and long-run effectsof the following events upon the economy:(a) The imposition of a carbon tax upon local big polluting companies;(b) An appreciation in the foreign exchange rate value of the economy’s currency;(c) A major trading partner’s economy fall into recession;(d) The country’s main exports fall in price while the goods the country imports from abroad rise in pricearrow_forward
- List the three reasons for why the aggregate-demand curve slopes downward. Explain Answerarrow_forwardA vertical aggregate supply graph indicates that aggregate demand has no effect on: Group of answer choices Quantity of output Wages Prices Inflationarrow_forwardThe following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL (CPI) 180 T 150 140 130 120 110 100 90 80 0 Aggregate Demand 100 200 300 400 500 600 REAL GDP (Billions of dollars) 700 800 (?) Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply. A higher price level makes domestically produced goods more expensive than foreign goods. A lower price level leads to a lower interest rate. A higher price level decreases consumption through the substitution effect. As the aggregate price level rises, the purchasing power of households' saving balances will demanded to This phenomenon is known as the effect. causing the quantity of outputarrow_forward
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