There are three factors that help explain the slope of the aggregate demand curve. Which two are less important? Why are they less important?
The wealth effect and the exchange-rate effect are less important than the interest-rate effect in the United States.
The wealth effect is not very important because it operates through changes in the real value of money, and money is only a small fraction of household wealth. So it is unlikely that changes in the price level will lead to large changes in consumption spending through this channel. The exchange-rate effect is not very important in the United States because trade with other countries represents a relatively small fraction of U.S. GDP. So a change in net-exports due to a change in the exchange rate is likely to have a relatively small impact on real GDP.
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All else equal, false advertising is more prevalent in all of the following types of communities except which one?
A) a resort town B) a college campus C) a tourist destination D) a small town with few visitors
If the government decreases the income tax rate, then:
A. GDP will decrease. B. aggregate demand will shift left. C. aggregate demand will shift right. D. aggregate supply curve with shift to the right.
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). b. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). c. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative). d. The GDP Price Index and net nonreserve-related international borrowing/lending remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
Which of the following is true of The Invisible Hand Theorem?
A. There can be no taxes of any kind. B. The slope of the production possibilities curve is not affected by movements along the production contract curve. C. Monopoly pricing will not distort efficiency as long as consumers are willing to pay the prices of the monopolists. D. Any position on the consumer contract curve can be efficient.