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ECON 103 Chapter Notes - Chapter 20.2: Aggregate Supply, Aggregate Demand, Price Level

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goldshark321
13 Jan 2017
School
University of Illinois
Department
Economics
Course
ECON 103
Professor
Mc Dermott Eric

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Document Summary

Why does the aggregate demand curve slope downward: a decrease in the price level raises the real value of money and makes consumers wealthier, which in turn encourages them to spend more. This depreciation stimulates u. s net exports and thereby increases the quantity of goods and services demanded. Conversely, when the us price level rises and causes us interest rates to rise, the real value of the dollar increases, and this appreciation reduces us net exports and the quantity of goods and services demanded. Why the aggregate demand curve might shift: any event that changes how much people want to consume at a given price level shifts the curve. Changes in taxation is an example: firms being optimistic or pessimistic about future business conditions, tax policy, money supply, changes in government purchases, changes in net exports. Why the aggregate supply curve is vertical in the long run: price level does not affect the long run determinants of real gdp.

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Related Questions

The aggregate demand curve slopes downward indicating that:
a. an increase in the general price level will increase the aggregate quantity of goods and services demanded.
b. consumers substitute between domestic-made and foreign-made goods as their relative prices change.
c. a change in the interest rate will alter the aggregate quantity of goods and services demanded.
d. an increase in the general price level will reduce the aggregate quantity of goods and services demanded.

According to the foreign purchases effect,  prices in the United States and prices in other countries remain stable, without a corresponding adjustment in exchange rates

A. U.S. consumers will buy more foreign goods and services, and imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will increase. The number of net exports will fall increasing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

B. U.S. consumers will buy more foreign goods and services, and imports will rise, foreigners will buy fewer goods and services produced in the United States, and exports will fall. The number of net exports will fall, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve..

C. U.S. consumers will buy fewer foreign goods and services, and Imports will rise foreigners will buy more goods and services produced in the United States, and exports will fall. The number of net exports will rise, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

D. U.S. consumers will buy more foreign goods and services, and Imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will rise. The number of net exports will rise, reducing the quantity of real GOP demanded, resulting in a downward sloping aggregate demand curve.

which of the following best describes why the aggregate demand curve is downward sloping?

a. As the aggregate price level decreases, the stock of existing physical capital increases.

b. As the aggregate price level increases, consumer expectations about future change.

c. An increase in the aggregate price level causes consumer and investment spending to fall because consumer purchasing power decreases and money demand increases.

d. As a good's price increases, holding all else constant, the good's quantity demanded decreases.