EC140 Lecture Notes - Lecture 7: Potential Output, Aggregate Supply, Aggregate Demand

21 views4 pages

blackcoyote578

15 Apr 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

meghan78 and 39778 others unlocked

EC140 Full Course Notes

Verified Note

21 documents

Document Summary

Relaionship between quanity of real gdp demanded and the price level. Aggregate demand curve (ad) plots quanity of real gdp demanded against price level. Wealth efect: rise in price level decreases quanity of real wealth (money, stocks ) To restore real wealth, people increase saving and decrease spending. Quanity of real gdp demanded: fall in price level increases quanity of real wealth. Rise in price level decreases real value of money and raises interest rate. People borrow and spend less so real gdp demanded decreases. Fall in price level increases real value of money and lowers interest rate. People borrow and spend more so real gdp demanded increases: internaional subsituion efect. Rise in price level increases price of domesic goods to foreign goods. Fall in price level increases quanity of real gdp. Change in inluences on buying plans other than price level changes aggregate demand. Expectaions about future income, future inlaion, and future proits change aggregate demand.

Related Questions

According to the foreign purchases effect, prices in the United States and prices in other countries remain stable, without a corresponding adjustment in exchange rates

A. U.S. consumers will buy more foreign goods and services, and imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will increase. The number of net exports will fall increasing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

B. U.S. consumers will buy more foreign goods and services, and imports will rise, foreigners will buy fewer goods and services produced in the United States, and exports will fall. The number of net exports will fall, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve..

C. U.S. consumers will buy fewer foreign goods and services, and Imports will rise foreigners will buy more goods and services produced in the United States, and exports will fall. The number of net exports will rise, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

D. U.S. consumers will buy more foreign goods and services, and Imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will rise. The number of net exports will rise, reducing the quantity of real GOP demanded, resulting in a downward sloping aggregate demand curve.

cyanhippopotamus115

A. A decrease in aggregate supply can result in:

a recession
cost-push inflation
demand-pull inflation
unemployment

B. In the short run (intermediate-range) of the aggregate supply curve, higher aggregate demand will increase

the price level but reduce real GDP.
real GDP without raising the price level
the price level without affecting real GDP
both the price level and real GDP

C. Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?

As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services
As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services
As prices fall, the government will have to reduce taxes, which will lead to an increase in the number of goods and services purchased
As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the number of goods and services purchased

carminewasp285

which of the following best describes why the aggregate demand curve is downward sloping?

a. As the aggregate price level decreases, the stock of existing physical capital increases.

b. As the aggregate price level increases, consumer expectations about future change.

c. An increase in the aggregate price level causes consumer and investment spending to fall because consumer purchasing power decreases and money demand increases.

d. As a good's price increases, holding all else constant, the good's quantity demanded decreases.

orchidhornet724

EC140 Lecture Notes - Lecture 7: Potential Output, Aggregate Supply, Aggregate Demand

EC140 Full Course Notes

Document Summary

Get access

Related Documents

EC140 Chapter Notes - Chapter 26: Stagflation, Monetarism

EC140 Lecture Notes - Lecture 9: Aggregate Demand, Demand Curve, Price Level

EC140 Lecture Notes - Lecture 9: Diminishing Returns, Aggregate Demand, Aggregate Supply

Related Questions