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Homework ECO201 Week 7

Homework ECO201 Week 7 - Questions Chap 33 1 Name two...

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Questions Chap 33 1. Name two macroeconomics variables that decline when the economy goes into recession. Name one macroeconomic variable that rises during a recession. Two macroeconomic variables that decline when the economy goes into a recession are real GDP and investment spending. A macroeconomic variable that rises during a recession is the unemployment rate. 3. List and explain the three reasons the aggregate-demand curve is downward sloping. The aggregate-demand curve is downward sloping because: (1) a decrease in the price level makes consumers feel wealthier, which in turn encourages them to spend more, so there is a larger quantity of goods and services demanded; (2) a lower price level reduces the interest rate, encouraging greater spending on investment, so there is a larger quantity of goods and services demanded; (3) a fall in the U.S. price level causes U.S. interest rates to fall, so the real exchange rate depreciates, stimulating U.S. net exports, so there is a larger quantity of goods and services
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