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Suppose a crash in the stock market reduces people's wealth. Using the model of aggregate demand and aggregate supply, identify the curves that are affected, and which way these curves would shift. Clearly explain the new equilibrium.

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Sonal Bahl
Sonal BahlLv10
29 Sep 2019

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Related questions

What are some of the factors that would shift the aggregate demand and supply curves. Given your answer, how would an increase in consumer wealth affect the overall US economy using the AS/AD model?

Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases.Ā 

A. People decide to have more children.
B. A strike by steelworkers raises steel prices.
C. Engineers develop new automated machinery for the production of minivans.
D. The price of sports utility vehicles rises.
E. A stock-market crash lowers people's wealth.

Which of the following is correct?

a)the intersection of the aggregate demand and aggregate supply curves determines the equilibrium price and quantity of a single good.

b)The aggregate demand curve indicates a positive relationship between the price level and GDP.

c)The intersection of the aggregate demand and aggregate supply curves determines the equilibrium price and quantity.

d)The intersection of the aggregate demand and aggregate supply curves determines the equilibrium price level and the equilibrium level of real GDP.

e)Other things equal, a downward shift of the aggregate demand curve implies that the economy enters an expansionary phase.

Ā 

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