The wealth effect and the interest rate effect are changes in the price level th

Question

The wealth effect and the interest rate effect are changes in the price level that bring about a movement along the aggregate demand curve lead to a shift of the demand curve for a particular good. result in a shift of the aggregate supply curve cause a movement along the aggregate supply curve The Aggregate Supply Curve: is irrelevant for determining macroeconomic equilibrium has a negative slope shifts with changes in consumer spending, investment, government spending net exports shows the various levels of output produced in the economy at different price levels

Explanation / Answer

20. (a) bring about a movement along the aggregate demand curve.

Higher price levels increase the interest rate, which causes business and consumer to reduce its spending due to the higher cost of borrowing.

21. (d) shows the various levels of output produced in the economy at different average price levels.

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