Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 24, Problem 24.2.8PA
To determine
The impact of downward shift in the AS curve due to price fall on AD.
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The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion.
The following table lists several determinants of aggregate demand.
Complete the table by indicating the change in each determinant necessary to decrease aggregate demand.
Change needed to decrease AD
Wealth
(increase/ decrease)
Taxes
(increase/ decrease)
Expected rate of return on investment
(increase/ decrease)
Incomes in other countries
(increase/ decrease)
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.
The following graph shows an aggregate demand curve (AD) illustrating the inverse relationship between the price level and the quantity of Real GDP
in the United States.
During World War II, the United States increased military spending.
Show the effect of the following scenario on the aggregate demand curve by dragging the curve or moving the point to the appropriate position.
Note: Tool tip: To move the curve, click and drag any part of the curve. The curve will snap into position, so if you try to move it and it snaps back to
its original position, just try again and drag it a little farther.
PRICE LEVEL
Aggregate Demand
I
I
"
I
1
REAL GDP
AD
AD
(?)
Chapter 24 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 24 - Prob. 24.1.1RQCh. 24 - Prob. 24.1.2RQCh. 24 - Prob. 24.1.3RQCh. 24 - Prob. 24.1.4PACh. 24 - Prob. 24.1.5PACh. 24 - Prob. 24.1.6PACh. 24 - Prob. 24.1.7PACh. 24 - Prob. 24.1.8PACh. 24 - Prob. 24.1.9PACh. 24 - Prob. 24.1.10PA
Ch. 24 - Prob. 24.2.1RQCh. 24 - Prob. 24.2.2RQCh. 24 - Prob. 24.2.4RQCh. 24 - Prob. 24.2.5RQCh. 24 - Prob. 24.2.6PACh. 24 - Prob. 24.2.7PACh. 24 - Prob. 24.2.8PACh. 24 - Prob. 24.2.9PACh. 24 - Prob. 24.2.10PACh. 24 - Prob. 24.2.11PACh. 24 - Prob. 24.2.12PACh. 24 - Prob. 24.2.13PACh. 24 - Prob. 24.2.14PACh. 24 - Prob. 24.2.15PACh. 24 - Prob. 24.3.1RQCh. 24 - Prob. 24.3.2RQCh. 24 - Prob. 24.3.3RQCh. 24 - Prob. 24.3.4PACh. 24 - Prob. 24.3.5PACh. 24 - Prob. 24.3.6PACh. 24 - Prob. 24.3.7PACh. 24 - Prob. 24.3.8PACh. 24 - Prob. 24.3.9PACh. 24 - Prob. 24.3.10PACh. 24 - Prob. 24.4.1RQCh. 24 - Prob. 24.4.2RQCh. 24 - Prob. 24.4.3RQCh. 24 - Prob. 24.4.4PACh. 24 - Prob. 24.4.5PACh. 24 - Prob. 24.4.6PACh. 24 - Prob. 24.4.7PACh. 24 - Prob. 24.4.8PACh. 24 - Prob. 24.4.9PACh. 24 - Prob. 24.4.10PACh. 24 - Prob. 24.2RDECh. 24 - Prob. 24.1CTECh. 24 - Prob. 24.2CTE
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