Due Friday 12.29.17 at 11:45 PM Attempts: Keep the Highest: /2 3. Why the aggreg

Question

Due Friday 12.29.17 at 11:45 PM Attempts: Keep the Highest: /2 3. Why the aggregate demand curve slopes downward The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of output demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of output demanded rises to $500 billion. 170 160 150 40-+ 130 120 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars)

Explanation / Answer

Cost of borrowing money decreases. Output demand increase. This phenomenon is known as Keynes interest rate effect

Of dollar to decrease. Will therefore increase. Imports will decrease. Net exports will increase. Demanded to increase, Mundell flemings exchange rate effect

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