Explain the difference between a movement along the aggregate demand curve and a shift of the aggregate demand curve
What will be an ideal response?
There is a movement along the aggregate demand curve if there is a change in the price level. If some factor that affects aggregate demand other than the price level changes, such as monetary or fiscal policy, income in the rest of the world, or expectations, there is a shift in the aggregate demand curve.
You might also like to view...
In 1991, Argentina decided to peg its currency (the Argentinean peso) to the U.S. dollar
To maintain the peg, Argentina had to purchase surplus pesos on the foreign exchange market, depleting its reserves of dollars to such an extent that it eventually had to abandon the peg. Show graphically what this implies about the peg relative to the equilibrium exchange rate in the market for the Argentinean peso.
The marginal physical product of an input is the
a. addition to output from using one more unit of an input. b. extra amount of an input needed to produce one additional unit of output. c. change in average physical product, given a change in the quantity of an input. d. slope of the production indifference curve for an output made using the input.
Which of the following events would be consistent with purchasing-power parity?
a. The price level in the United States rises more rapidly than that in Ireland and the real exchange rate defined as Irish goods per unit of U.S. goods stays the same. b. The money supply in the United States rises more rapidly than in Egypt and the nominal exchange rate defined as Egyptian pounds per dollar falls. c. Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices one morning and finds that whatever country he decides to go to he can convert $15 into enough local currency to buy the same breakfast. d. All of the above are correct.
A firm can sell as much as it wants at a constant price. Demand is thus:
A. perfectly inelastic. B. perfectly elastic. C. relatively inelastic. D. relatively elastic.