What are the three forces that cause the aggregate demand curve to slope down? Explain
What will be an ideal response?
The three forces are the real-balance effect, the interest rate effect, and the open-economy effect. An increase in the price level causes the purchasing power of money balances to fall, interest rates to increase and borrowing to fall, and imports to increase and exports to decrease. Each of these cause total planned real expenditures to decrease.
You might also like to view...
Thousands of U.S. banks failed in the 1930s because the Fed loaned too many reserves to member banks
a. True b. False Indicate whether the statement is true or false
Nascent industries require adequate protection from foreign competition because:
a. they experience economies of scale. b. they experience diseconomies of scale. c. the quality of the products of such industries are comparatively inferior than the products of their foreign competitors. d. they do not have adequate resources to undertake research and development. e. their initial costs of production are considerably higher than the foreign firms.
Which of the following would be a consequence of the retirement of the internally held portion of the public debt?
A. A reduction in the nation's productive capacity B. A reduction in the nation's standard of living C. A redistribution of the nation's wealth among its citizens D. An increase in aggregate expenditures in the economy
Assuming no government or foreign sector, if the MPC is 0.9, the multiplier is
A. 0.1. B. 5. C. 9. D. 10.