A shift to the right of the aggregate demand curve

A shift to the right of the aggregate demand curve - goods...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
A shift to the  right  of the aggregate demand curve. from AD 1  to AD 2 , means that at the  same price levels the quantity demanded of real GDP has  increased . A shift to the  left  of  the aggregate demand curve, from AD 1  to AD 3 , means that at the same price levels the  quantity demanded of real GDP has  decreased Changes in aggregate demand are not caused by changes in the price level. Instead,  they are caused by changes in the demand for any of the components of real GDP,  changes in the demand for consumption goods and services, changes in investment  spending, changes in the government's demand for goods and services, or changes in  the demand for net exports. Consider several examples. Suppose consumers were to decrease their spending on all 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: goods and services, perhaps as a result of a recession. Then, the aggregate demand curve would shift to the left. Suppose interest rates were to fall so that investors increased their investment spending; the aggregate demand curve would shift to the right. If government were to cut spending to reduce a budget deficit, the aggregate demand curve would shift to the left. If the incomes of foreigners were to rise, enabling them to demand more domestic-made goods, net exports would increase, and aggregate demand would shift to the right. These are just a few of the many possible ways the aggregate demand curve may shift. None of these explanations, however, has anything to do with changes in the price level....
View Full Document

This note was uploaded on 11/18/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

Ask a homework question - tutors are online