Aplia: Student Question x -o c courses aplia.com/at ser let/quiz?ctx-sarna-0004&

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Aplia: Student Question x -o c courses aplia.com/at ser let/quiz?ctx-sarna-0004&quiz; action-takeQuiz&quiz; probGuid-QNAPC0A801010000002edbee20060000&ck-4-146213355281; 30AAA05590 The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1 to AD2, causing the quantity of output demanded at a price level of 130 to fall from $400 billion to $200 billion PRICE LEVEL 170 160 150 140 AD1 130-- 120 110 100 90 0 100 200 300 400 500 600 700 800 QUANTITY OF OUTPUT (Billions of dollarsl The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand Determinant Wealth Taxes Interest rates The value of the domestic currency relative to the foreign currency Change Needed to Decrease AD Session Timeout 37:17 I'm Cortana. Ask me anything w 4:42 PM 5/1/2016

Explanation / Answer

When Wealth decreases,demand for goods falls leading to its leftward shift. When taxes rises,income after tax falls,leading to fall in demand and leftward shift of AD curve. When interest rate rises,investment falls,since investment is a positive compoent of AD,so AD shifts leftward whan investment falls. when domestic currency relative to the foreign corrency appreciates,net exports falls, leading to shift of AD to left.

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