Fill in the blanks to make the following statements correct. In the simple macro

Question

Fill in the blanks to make the following statements correct. In the simple macro model, the price level was held In the macro model of this chapter, the price level is A change in the price level shifts the AE curve because the price level change affects desired consumption expenditures and desired government expenditures. consumption expenditures and desired net exports. government expenditures and desired net exports. investment exp expenditures. A rise in the price level causes in households' wealth, which leads to in desired consumption, which causes the AE curve to shift A rise in the domestic price level causes net exports to which causes the AE curve to shift Equilibrium GDP is determined by the position of the AE function for each given price level. An equilibrium point for a particular price level corresponds to one point on the curve. A rise in the price level causes a downward shift of the curve and a movement upward along the curve A decrease in autonomous expenditure, with no change in the price level, causes the AE curve to shift and causes the AD curve to shift to the

Explanation / Answer

a. constant, flexible

b. B) consumption expenditure and desired net exports

change in price level changes the consumption expenditure and also affects the net exports of a country.

c. decrease, increase, upward

d. decrease, downward

Increase in price level makes domestic goods expensive compared to foreign goods. So, exports will decrease while imports increases.

e. AD curve

f. Aggregate supply, Aggregate demand

Rise in the price shifts the AS curve rightwards which leads to downward movement along AD curve.

g. downward, leftward

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