quiz 9 notes.docx - What relationship is shown by the aggregate demand curve The aggregate demand curve shows the relationship between D the price level

quiz 9 notes.docx - What relationship is shown by the...

This preview shows page 1 - 3 out of 12 pages.

What relationship is shown by the aggregate demand curve? The aggregate demand curve shows the relationship between D. the price level and the quantity of real GDP demanded by households, firms, and the government. What relationship is shown by the aggregate supply curve? The short run aggregate supply curve shows the relationship in the short run between B. the price level and the quantity of real GDP supplied by firms. The aggregate demand curve slopes downward for all of the following reasons except: D. A lower price level makes imports from other countries less expensive, and U.S. citizens buy more imports. The aggregate demand curve slopes downward due to the wealth effect, the interest-rate effect, and the international-trade effect, and the demand curve for an individual product slopes downward due to consumers substituting the more expensive product for cheaper goods. Increases in government purchases will make the aggregate demand curve shift to the right. Consider each of the following events and then figure out how each of these events will affect the aggregate demand curve. a. An increase in the price level will cause a movement up along the aggregate demand curve. b. An increase in government purchases will cause a rightward shift of the aggregate demand curve. c. An increase in state income taxes will cause a leftward shift of the aggregate demand curve. d. An increase in interest rates will cause a leftward shift of the aggregate demand curve. e. A faster income growth in other countries will cause a rightward shift of the U.S. aggregate demand curve.
Image of page 1

Subscribe to view the full document.

Consider the two aggregate demand curves in the graph at right. A movement from point A to point B on AD 1 could be the result of a B. change in the price level. A movement from point A to point C could be the result of a D. change in the expectations of households. An economics student makes the following statement: "It's easy to understand why the aggregate demand curve is downward sloping: When the price level increases, consumers substitute into less expensive products, thereby decreasing total spending in the economy." This statement is false because the aggregate demand curve is B. downward sloping because as prices rise, consumer real wealth declines, interest rates rise, and exports become more expensive. Explain whether each of the following will cause a shift of the AD curve or a movement along the AD curve. a. Firms become more optimistic and increase their spending on machinery and equipment. Because this is a change in investment , it will cause a shift to the right in the aggregate demand curve. b. The federal government increases taxes in an attempt to reduce a budget deficit. Because this is a change in consumption , it will cause a shift to the left in the aggregate demand curve.
Image of page 2
Image of page 3
  • Fall '10
  • staff

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask You can ask ( soon) You can ask (will expire )
Answers in as fast as 15 minutes