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As the price level decreases, the cost of borrowing money will (remain the same/increase/decrease) , causing the quantity of output demanded to (rise/increase/fall/remain the same) . This phenomenon is known as the (exchange rate/interest rate/wealth) effect.   Additionally, as the price level decreases, the impact on the domestic interest rate will cause the real value of the dollar to (rise/decrease/falll) in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore (rise/increase/fall/remain the same) , and the number of foreign products purchased by domestic consumers and firms (imports) will (rise/decrease/fall/remain the same) . Net exports will therefore (rise/increase/fall/remain the same) , causing the quantity of domestic output demanded to (fall/increase/remain the same/rise) . This phenomenon is known as the (exchange rate/interest rate/wealth) effect.

As the price level decreases, the cost of borrowing money will (remain the same/increase/decrease) , causing the quantity of output demanded to (rise/increase/fall/remain the same) . This phenomenon is known as the (exchange rate/interest rate/wealth) effect.   Additionally, as the price level decreases, the impact on the domestic interest rate will cause the real value of the dollar to (rise/decrease/falll) in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore (rise/increase/fall/remain the same) , and the number of foreign products purchased by domestic consumers and firms (imports) will (rise/decrease/fall/remain the same) . Net exports will therefore (rise/increase/fall/remain the same) , causing the quantity of domestic output demanded to (fall/increase/remain the same/rise) . This phenomenon is known as the (exchange rate/interest rate/wealth) effect.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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As the price level decreases, the cost of borrowing money will (remain the same/increase/decrease)   , causing the quantity of output demanded to  (rise/increase/fall/remain the same)  . This phenomenon is known as the  (exchange rate/interest rate/wealth)  effect.

 
Additionally, as the price level decreases, the impact on the domestic interest rate will cause the real value of the dollar to (rise/decrease/falll)   in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore   (rise/increase/fall/remain the same) , and the number of foreign products purchased by domestic consumers and firms (imports) will  (rise/decrease/fall/remain the same)  . Net exports will therefore   (rise/increase/fall/remain the same) , causing the quantity of domestic output demanded to  (fall/increase/remain the same/rise)   . This phenomenon is known as the (exchange rate/interest rate/wealth)    effect.
 
 
The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $300 billion, and the price level is 140. Moving down along the AD curve from point X to point Y, the quantity of output demanded increases to $500 billion, and the price level decreases to 120. PRICE LEVEL 170 160 150 140 130 120 110 100 90 0 1 100 300 400 500 OUTPUT (Billions of dollars) 200 AD 600 700 As the price level decreases, the cost of borrowing money will to This phenomenon is known as the 800 causing the quantity of output demanded effect.
Transcribed Image Text:The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $300 billion, and the price level is 140. Moving down along the AD curve from point X to point Y, the quantity of output demanded increases to $500 billion, and the price level decreases to 120. PRICE LEVEL 170 160 150 140 130 120 110 100 90 0 1 100 300 400 500 OUTPUT (Billions of dollars) 200 AD 600 700 As the price level decreases, the cost of borrowing money will to This phenomenon is known as the 800 causing the quantity of output demanded effect.
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