Whydoesadslopedown internationaltradeeffectnxfalls

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

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: S Q Why Does AD Slope Down? Why Does AD Slope Down? Firms: interest rate effect on investment – DLF shifts right and SLF shifts left Interest rate rises Amount of dollars borrowed/lent roughly unchanged Real investment falls S’ D’ r D S e1 e0 Q Why Does AD Slope Down? Why Does AD Slope Down? International trade effect: NX falls – – – Imports rise when domestic prices rise Exports fall when domestic prices rise At last a substitution effect! Why Does AD Shift? Why Does AD Shift? Changes in fiscal policy – Set by Congress and the Treasury Changes in monetary policy – Set by the Central Bank (Federal Rese...
View Full Document

This note was uploaded on 02/25/2014 for the course BUSINESS 2101 taught by Professor Gerst during the Spring '12 term at Temple.

Ask a homework question - tutors are online