8. Which of the following explain why the Aggregate Demand curve is downward sloping? a) An increase in the price level decreases the purchasing power of money denominated wealth, which in turn causes a decline in on consumption spending. b) An increase in the price level decreases the purchasing power of money, which means that more money is needed to purchase goods. This causes buyers of investment and durable goods to require bigger loans to finance their purchases. This, in turn, causes an increase in the demand for loanable funds which leads to a higher interest rate. A higher interest rate will reduce the real purchases of investment and durable goods. c) An increase in the price level makes goods relatively more expensive to foreigners causing them to buy less which means that net exports will decline. d) All of the above. e) None of the above.9. Which of the following explain why the Aggregate Supply curve is upward sloping? a) As the price level rises consumers are forced to work longer hours to stay ahead of inflation. b) Demand and therefore sales increase as prices increase. c) Changes in wages and prices of other resources lag behind changes in product prices. d) All of the above. e) None of the above.10. Which of the following would cause the Aggregate Quantity Demanded to increase? a) An increase in the price level causing an increase in the purchasing power of the consumer's wealth b) A decrease in the price level making domestic prices less expensive relative to foreign prices c) An increase in the price level causing an increase in the market rate of interest d) A decrease in the price level causing a decrease in the purchasing power of the consumers' wealth e) None of the above

Aggregate demand refers to the overall demand of goods or services by an economy over a period of…

Answered: 8. Which of the following explain why…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.8P

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8. Which of the following explain why the Aggregate Demand curve is downward sloping?

		a) An increase in the price level decreases the purchasing power of money denominated wealth, which in turn causes a decline in on consumption spending.
		b) An increase in the price level decreases the purchasing power of money, which means that more money is needed to purchase goods. This causes buyers of investment and durable goods to require bigger loans to finance their purchases. This, in turn, causes an increase in the demand for loanable funds which leads to a higher interest rate. A higher interest rate will reduce the real purchases of investment and durable goods.
		c) An increase in the price level makes goods relatively more expensive to foreigners causing them to buy less which means that net exports will decline.
		d) All of the above.
		e) None of the above.

9. Which of the following explain why the Aggregate Supply curve is upward sloping?

		a) As the price level rises consumers are forced to work longer hours to stay ahead of inflation.
		b) Demand and therefore sales increase as prices increase.
		c) Changes in wages and prices of other resources lag behind changes in product prices.
		d) All of the above.
		e) None of the above.

10. Which of the following would cause the Aggregate Quantity Demanded to increase?

		a) An increase in the price level causing an increase in the purchasing power of the consumer's wealth
		b) A decrease in the price level making domestic prices less expensive relative to foreign prices
		c) An increase in the price level causing an increase in the market rate of interest
		d) A decrease in the price level causing a decrease in the purchasing power of the consumers' wealth
		e) None of the above

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