Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134061115
Author: CASE
Publisher: PEARSON
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Question
Chapter 11, Problem 4.1P
To determine
Effect of changes in wealth on aggregate
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In the past 10 years, Asia-based investors have made large investments in Canadian real estate markets. Many commentators believe that this investment has the aim of moving wealth from risky home markets into the safer Canadian market.
What will the effect of this capital flow on Canadian aggregate demand?
The most important reason for the slope of the aggregate-demand curve is that as the price level
a.
increases, interest rates increase, and investment decreases.
b.
decreases, interest rates increase, and investment increases.
c.
increases, interest rates decrease, and investment increases.
d.
decreases, interest rates decrease, and investment decreases.
Explain fully why the aggregate demand curve has a negative slope.
Chapter 11 Solutions
Principles of Macroeconomics (12th Edition)
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- Following the equation: Y = C + I + G + NX will the below examples increase or decrease the aggregate demand in Pakistan? What will be the shift in position for below situations? Widespread fear of recession (1 Mark) The appreciation in the Pakistani Rupee rate (1 Mark) A boom in the stock market (1 Mark) An increase in transfer payment (1 Mark) A decrease in real interest rate in Pakistan (1 Mark)arrow_forwardAssume that the economy is in equilibrium when aggregate demand curves shifts to the right. What happens to the economy in the short-run? the GDP gap becomes positive. Allowed to self-correct, the economy will experience higher inflation. the GDP gap becomes negative. Allowed to self-correct, the economy will experience higher inflation. the GDP gap does not change, but the inflation rate will rise. there is not enough information to answer the question.arrow_forwardWhich of the following is not a reason for the downward slope of the aggregate demand curve? Government spending effect Interest-rate effect Real balances effect Net exports effectarrow_forward
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