Why does aggregate demand shift outward by a greater amount than the initial change in spending?
What will be an ideal response?
The basic reason is because of the multiplier. As shown by the aggregate expenditures model, an initial increase in spending times the multiplier will be the amount that aggregate expenditures shift upward. The size of this total increase will also be the amount of the shift of the aggregate demand curve outward. Thus, the shift of the aggregate demand curve will be equal to the initial change in spending times the multiplier.
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If a one-year bond is purchased for $700 and the interest rate is 5 percent, what will it pay in one year?
A) $35 B) $665 C) $735 D) $770
In the foreign exchange market, an increase in the exchange rate leads to
A) an increase in the quantity of dollars demanded and no movement along the demand curve for dollars. B) an increase the quantity of dollars supplied and a movement along the supply curve of dollars. C) an increase the quantity of dollars supplied and no movement along the supply curve of dollars. D) a decrease the quantity of dollars supplied and a movement along the supply curve of dollars. E) an increase in the quantity of dollars demanded and a movement along the demand curve for dollars.
The United States dollar has NOT been officially convertible to gold by international traders since
A) 1930. B) 1944. C) 1971. D) 1995.
If people come together through the political process and agree to pay taxes and make group decisions about the quantity of public goods produced, they can defeat the free rider problem with laws that require people pay taxes to contribute to public goods
a. True b. False Indicate whether the statement is true or false