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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?

To determine

Impact on equilibrium level of GDP and price level due to increase in value of stocks is to be determined.

Explanation

An increase in the value of stock market means an increase in the prices of stock. It would make people wealthier. They will have more money to spend or to invest further. Consumption and investment will increase, thereby shifting aggregate demand curve to its right...

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