AD-AS.ppt - Aggregate Demand Aggregate Demand refers to the...

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Aggregate Demand Aggregate Demand refers to the quantity demanded of goods and services, or the quantity demanded of the Real GDP, at various price levels.
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Aggregate Demand Curve Notice the curve is downward sloping, indicating an inverse relationship between the price level and the quantity demanded of Real GDP: as the price level rises, the quantity demanded of Real GDP falls, and as the price level falls, the quantity of GDP demanded of Real GDP rises.
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A Shift in the Aggregate Demand Curve
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4 Shifts of the AD Curve When we move along AD curve in Figure 2, we assume that price level changes But that other influences on equilibrium GDP are constant Keep following rule in mind When a change in price level causes equilibrium GDP to change, we move along AD curve Whenever anything other than price level causes equilibrium GDP to change, AD curve itself shifts Equilibrium GDP will change whenever there is a change in any of the following Government purchases –fiscal policy tool Autonomous consumption spending Investment spending Net exports Taxes – fiscal policy tool Money supply- monetary policy
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What Causes Consumption to Increase? Wealth Expectations about Future Prices and Income Interest Rate Income Taxes
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What Causes Investment to Increase? The Interest Rate Expectations about Future Sales Business Taxes
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What Would Increase Net Exports?
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