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6. Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019
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Related questions

The AS/AD model is an excellent way to understand how specific policies and actions affect output and prices in an economy. Think about these questions as you discuss this topic:

What is the aggregate demand (AD) curve? What are the components of AD? What factors can shift the AD curve?

What is the difference between the long-run aggregate supply curve and the short-run aggregate supply curve?

What is MPC? How does the spending multiplier work?

Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or the left?). Also determine the effect on the price level, the real output level, and employment/unemployment. Explain and express this graphically using the AS/AD macro model.

A fall in the value of the dollar makes U.S. goods cheaper to foreigners and foreign goods more expensive to U.S. citizens. This shifts the U.S. aggregate demand curve to the right.

Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or the left?). Also determine the effect on the price level, the real output level, and employment/unemployment. Explain and express this graphically using the AS/AD macro model.


Show that, starting from a long-run equilibrium, an increase in government expenditures increases output in the short-run but not in the long-run.

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