State how shifts in the aggregate demand curve can explain the movement of real GDP around potential GDP
What will be an ideal response?
When the aggregate demand curve and the aggregate supply curve intersect at the level of potential GDP, then real GDP is equal to potential GDP. When something shifts the aggregate demand curve rightward, then the aggregate demand curve and the aggregate supply curve will intersect at a level of real GDP that is above potential GDP. The economy will be in an expansion. When something shifts the aggregate demand curve leftward, then the aggregate demand curve and the aggregate supply curve will intersect at a level of real GDP that is below potential GDP. The economy will be in a recession.
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An Indian student paid $16,000 for a course in a university in the U.S. This transaction will lead to a(n) ________
A) decrease in the GDP of India B) increase in the GDP of India C) increase in the GDP of U.S. D) decrease in the GDP of U.S.
A demand curve
A) has an upward slope. B) has a downward slope. C) is a graph of the relationship between quantity demanded of a good and its price. D) Both answers B and C are correct. E) Both answers A and C are correct.
In the Keynesian model of an open economy, a temporary decrease in government purchases would ________ the domestic real interest rate and ________ net desired saving (desired saving less desired investment) in the economy
A) lower; increase B) lower; decrease C) raise; increase D) raise; decrease
During inflationary periods
a. the real value of money rises. b. the real value of money remains constant. c. the real value of money falls. d. the purchasing power of money rises.