What is the real balances effect, and how does it explain the shape of the aggregate demand curve?
What will be an ideal response?
The real balances effect has to do with the inverse relationship between the price level and the quantity demanded of real output. As the price level falls, the real value of cash balances increases. Each dollar actually buys more output. As the purchasing power increases, the demand for real output increases. This inverse relationship is one of the effects that causes the aggregate demand curve to slope downward.
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An economy's investment demand curve shows the inverse relationship between the quantity of investment demanded and the market interest rate, other things held constant
a. True b. False Indicate whether the statement is true or false
A college student is thinking about running an ice-cream truck over the summer. What would economists say is the student's main objective?
A. To maximize hourly earnings B. To maximize his profit C. To spend as little on inputs as possible D. To sell as many ice cream cones as possible
The short-term unemployment arising from the process of matching workers with jobs is called
A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment.
A country is said to have an absolute advantage in a good over another country if that first country:
A. Can produce more units of the good B. Is a more efficient producer of the good C. Is a major consumer of the good D. Has a lower opportunity cost of producing the good