Whydoesadslopedown firmsinterestrateeffectoninvestment

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Unformatted text preview: effect on consumption – As price level rises, the value of its assets falls – With less wealth, consumption spending falls – Have contrary effects if hyperinflation exists Why Does AD Slope Down? Why Does AD Slope Down? Firms: interest rate effect on investment – As price rises we need more money for transactions Firms want to borrow more DLF shifts right D’ r D Q Why Does AD Slope Down? Why Does AD Slope Down? Firms: interest rate effect on investment – As price rises we need more money for transactions Households want to save less SLF shifts left r S’...
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This note was uploaded on 02/25/2014 for the course BUSINESS 2101 taught by Professor Gerst during the Spring '12 term at Temple.

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