Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?
What will be an ideal response?
The AD curve slopes downward because of the real balances (wealth) effect, the interest-rate effect and the net exports effect. Anything that increases total spending in the national economy would shift the aggregate demand curve to the right and increase real GDP and the price level (creating demand-pull inflation).
You might also like to view...
How does money function as a unit of account? a. Money has intrinsic worth as a commodity
b. Money is convertible into commodities that have intrinsic worth. c. The prices of all goods and services are measured in terms of money. d. Things that function as money can do so because people know there is a standard of value that ultimately backs the money even if it is only faith. e. Bank accounts make it easy for people to store their wealth.
Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her
home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce. Ziva's accountant would calculate the total cost for the day of farming to equal a. $25. b. $130. c. $300. d. $380.
Which of the following would most likely cause the movement from S 1 to S 2 ?
a. A much higher percentage of high school graduates seek jobs rather than go to
college.
b. There is an increasing trend among people in their fifties to retire early.
c. A well-publicized medical study motivates a large number of people to reduce their
work hours.
d. A country uses the profits from its nationalized oil industry to give an income subsidy
to all citizens.
Use the following balance sheet data for the First National Bank to answer the next question.AssetsLiabilities + Net WorthReserves$50,000Checkable deposits$120,000Loans75,000Stock shares130,000Securities25,000 Property100,000 If a check for $14,000 is drawn and cleared against this bank, then its reserves and checkable deposits will be, respectively
A. $50,000 and $120,000. B. $36,000 and $106,000. C. $36,000 and $120,000. D. $50,000 and $106,000.