Give examples of factors that decrease aggregate demand. Which way does the aggregate demand curve shift?
What will be an ideal response?
Anything that decreases aggregate spending decreases aggregate demand. A rise in the interest rate, a decrease in the quantity of money, a decrease in government expenditure, a tax hike, a rise in the exchange rate, and a decrease in real GDP in the rest of the world all decrease aggregate demand. The aggregate demand curve shifts leftward.
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A) a lower Human Development Index B) a higher Human Development Index C) a higher rate of unemployment D) a lower life expectancy at birth
In the 2008-09 recession, the government deficit
A) stayed roughly constant. B) decreased. C) increased. D) would have increased if the government had intervened.
The lemons problem gives the owners of above-average-quality used cars an incentive to:
A. offer a warranty when selling their cars. B. exaggerate the quality of their cars when selling them. C. ask for a sales price that is higher than the blue book value of their car. D. understate the true quality of their cars when selling them.
The ratio at which nations will exchange one product for another is known as the:
A. Exchange rate B. Discount rate C. Terms of trade D. Balance of trade