Which of the following is not a reason for the downward slope of the aggregate demand curve? O a. Interest-rate effect O b. Net exports effect O c. Government spending effect O d. Real balances effect
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- The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the puce of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. a. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level?Assume that (a)the price level is flexible upward but not downward and (b) the economy iscurrently operating at its full-employment output. Other things equal, how willeach of the following affect the equilibrium price level and equilibrium levelof real output in the short run?· An increase in aggregate demand.· A decrease in aggregate supply, with no change in aggregatedemand.· Equal increases in aggregate demand and aggregate supply.· A decrease in aggregate demand.· An increase in aggregate demand that exceeds an increase inaggregate supply.
- Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy's multiplier is 4. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?E1 Given the event below, describe the effect on the aggregate demand curve (AD). A.No effect B.Increase C.Decrease - A. B. C. Interest rates increase - A. B. C. Income levels increase - A. B. C. Price level decrease - A. B. C. Oil prices decrease - A. B. C. Government authorizes a large spending package for the purchase of weapons to be sent to Ukraine - A. B. C. Price level increaseWhat effects would each of the following have on aggregate demandor aggregate supply, other things equal? In each case explain the expectedeffects on the equilibrium price level and the level of real output, assumingthat the price level is flexible both upward and downward. · A reduction in interest rates at each price level.· A major increase in spending for health care by the Federalgovernment.· A 10 percent across-the-board reduction in personal income taxrates.· A sizable increase in labor productivity (with no change innominal wages).· An increase in exports that exceeds an increase in imports (notdue to tariffs).
- Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..Why is the aggregate demand curve downsloping? Mention three ways of explanations to answer this. Specify how your explanation differs from the explanation for the downsloping demand curve for a single product.c. Assume that the economy of Xenobia is at full employment. Explain how an increase in net investment will affect each of the following.i. Aggregate demandii. Long-run aggregate supplyiii. Output