1. Business
  2. Economics
  3. practice aggregate demand curve part 1 to clarify the aggregate...

Question: practice aggregate demand curve part 1 to clarify the aggregate...

Question details

Practice Aggregate Demand Curve Part 1

To clarify: The aggregate demand curve equals: C+I+G+(X+M)

Price level AD2 AD, ADS Real GDPExercise: Assume the economy begins at AD1 in the graph to the right. For each of the following, identify which new AD will result from the change in the description, or if it a movement along the curve (A to B vice versa).

  1. B

    A

    Per capita incomes abroad grow more rapidly than incomes at home
    1. Change to AD1
    2. Explanation
  2. Government cuts income tax rates on households
    1. Change to AD1
    2. Explanation
  3. Real interest rates decrease.
    1. Change to AD1
    2. Explanation
  4. A stock market bubble bursts and share prices tumble
    1. Change to AD1
    2. Explanation
  5. Government, in an effort to balance its budget, reduces spending on infrastructure repairs
    1. Change to AD1
    2. Explanation
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution