When the housing bubble burst in 2007, home prices fell and this eliminated a large fraction of many households’ home equity. The most likely outcome of this large decrease in the value of households’ assets is: a rightward shift in the aggregate demand curve a rightward shift in the aggregate supply curve a leftward shift in the aggregate demand curve a leftward shift in the aggregate supply curve
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When the housing bubble burst in 2007, home prices fell and this eliminated a large fraction of many households’ home equity. The most likely outcome of this large decrease in the value of households’ assets is:
a rightward shift in the aggregate demand curve
a rightward shift in the
a leftward shift in the aggregate demand curve
a leftward shift in the aggregate supply curve
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- Q4 a) When the demand of output decides how much to produce which type of demand prevails in the economy? B) Why investment is negatively related to interest rate?c) Give the equilibrium in the market for loans?The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion. The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change needed to decrease AD Wealth (increase/ decrease) Taxes (increase/ decrease) Expected rate of return on investment (increase/ decrease) Incomes in other countries (increase/ decrease)Is a change in business investment a determinant of aggregate demand or aggregate supply? What happens to the equilibrium Real GDP and price level when business investment decreases? Would this cause a recession or inflation? Is a change in consumer spending a determinant of aggregate demand or aggregate supply? What happens to the equilibrium Real GDP and price level when consumer spending decreases? Would this cause a recession or inflation?
- The following are variables that may cause shifting of aggregate demand (AD) curve. Discuss the effect of increasing these variables to the aggregate demand. Use graphical approach to demonstrate the effect of increasing of each variable and explain why the AD curve shifted. a) Government expenditure (domestic)“The oil Price run-up of 2007-08 was caused by strong demand confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been very similar to those observed in earlier episodes, with significant effects on overall consumption spending and purchases of domestic automobiles in particular. The experience of 2007-08 should thus be added to the list of recessions to which oil prices appear to have made a material contribution.” Source: Hamilton, J.D., 2009. Causes and Consequences of the Oil Shock of 2007-08 (No. w15002). National Bureau of Economic Research. a) Oil price shocks have an evident impact on the short run aggregate supply curve. With the help of a graph demonstrate how rising oil prices affect the SRAS and explain what other factors can cause this shift. b) Different theories…Use the interactive graph to illustrate the effects of a rise in investor confidence. Next, move point E to the new equilibrium Interest Rate Saving and Invest What is true of the new equilibrium? Supply Select the answer that best describes the new equilibrium. The interest rate decreased, but investment increased. The interest rate and the level of investment decreased. The interest rate and the level of investment increased. The interest rate increased, but investment, decreased. Dollars Saved Dollars Borrowed Dollars Saved Dollars Borrowed Desund
- Consider the following demand components: Consumption described as a following: 120 million USD as an autonomous level of consumption plus 80% of disposable income spends on consumption. I = 50 G=10 T= 25 Assuming goods market equilibrium, show equilibrium level of output in this economy: How much output increase, if G increase from 10 to 20, show your calculations:Mathematical economics: For an economy the following consumption function is given : C = 60+0.75 Y. %3D (a) If investment in a year is $35 crores, what will be the equilibrium level of income or output ? (b) If full-employment level of income (i.e., level of potential output) is $460 crores, what investment is required to be undertaken to ensure equilibrium at full employment ?Assume the aggregate demand for a good follows the law of demand (@gª < 0). Suppose the equilibrium in the market for др the good moves from Point A to Point B. Which statement below must be true? Р A Q A. B. C. Demand decreased and supply decreased Demand increased and supply decreased Demand decreased and supply increased D. Demand increased and supply increased E. Demand increased but we don't know if supply shifted F. Demand decreased but we don't know if supply shifted
- 7) Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve? A) They will move the economy up along a stationary aggregate demand curve. B) They will move the economy down along a stationary aggregate demand curve. C) They will shift the aggregate demand curve to the right. D) They will shift the aggregate demand curve to the left.Q.No.5. How the aggregate demand and changes in aggregate demand curves can be drawn graphically. Also illustrate the reasons of:A downward slope of aggregate demand curveB changes in aggregate demandThe following graph shows an increase in aggregate supply (ASAS) in a hypothetical economy. Specifically, aggregate supply shifts to the right from AS1AS1 to AS2AS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. The following table lists several determinants of aggregate supply. Complete the table by indicating the changes in the determinants necessary to increase aggregate supply. Determinant Change Needed to Increase ASAS Nominal Wage Rate Tax Rates Technology