ECON 2010 Chapter : Chapter 13 Notes

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15 Mar 2019
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Aggregate demand: aggregate demand & aggregate supply model a model that explains short-run fluctuations in real. Gdp & the price level: why is the aggregate demand curve downward sloping, gdp has four components: consumption (c), investment (i), government purchases (g), & net exports (nx). Recall, letting y = gdp, then y=c+i+g+nx: the wealth effect: how a change in the price level affects consumption, the phenomenon of price level fluctuations affecting consumption is called the wealth effect. Lower prices increases perceived wealth & increases consumption. 2: if foreign countries buy fewer u. s. goods or if the us buys more foreign goods, net exports will fall. The aggregate demand curve will shift to the left: government can increase or decrease spending (g) &/or taxes (t), increasing spending or decreasing taxes will increase aggregate demand (ad). More money is being spent (g) or is available to be spent (less t).

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