Interest rates Domestic currency value relative to the foreign currency Consumer expectations about future profitability Government spending Change Required to Decrease AD
Interest rates Domestic currency value relative to the foreign currency Consumer expectations about future profitability Government spending Change Required to Decrease AD
Chapter1: Making Economics Decisions
Section: Chapter Questions
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![**3. Determinants of Aggregate Demand**
The graph below is associated with a hypothetical country. Consider a decrease in aggregate demand (AD). Specifically, aggregate demand shifts to the left from \( AD_1 \) to \( AD_2 \), causing the quantity of output demanded to fall at each price level. For instance, at a price level of 140, output is now $200 billion, where initially it was $300 billion.
![Graph illustrating the shift in aggregate demand]
In the graph, the vertical axis represents the price level, and the horizontal axis represents output (in billions of dollars). The initial aggregate demand curve, \( AD_1 \), intersects the price level of 140 at an output level of $300 billion. The new aggregate demand curve, \( AD_2 \), intersects the same price level at an output level of $200 billion, demonstrating the decrease in aggregate demand.
The following table lists several determinants of aggregate demand.
**Fill in the missing values in the table by selecting the change in each scenario required to decrease aggregate demand.**
| Determinant | Change Required to Decrease AD |
|-----------------------------------------------------------------------|--------------------------------|
| Interest rates | |
| Domestic currency value relative to the foreign currency | |
| Consumer expectations about future profitability | |
| Government spending | |](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F52bd3cfe-3c9b-40ce-8732-3b0b81ba9280%2F34d31558-5851-478f-85f6-4a3e10f211f2%2Fu7i0u74_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**3. Determinants of Aggregate Demand**
The graph below is associated with a hypothetical country. Consider a decrease in aggregate demand (AD). Specifically, aggregate demand shifts to the left from \( AD_1 \) to \( AD_2 \), causing the quantity of output demanded to fall at each price level. For instance, at a price level of 140, output is now $200 billion, where initially it was $300 billion.
![Graph illustrating the shift in aggregate demand]
In the graph, the vertical axis represents the price level, and the horizontal axis represents output (in billions of dollars). The initial aggregate demand curve, \( AD_1 \), intersects the price level of 140 at an output level of $300 billion. The new aggregate demand curve, \( AD_2 \), intersects the same price level at an output level of $200 billion, demonstrating the decrease in aggregate demand.
The following table lists several determinants of aggregate demand.
**Fill in the missing values in the table by selecting the change in each scenario required to decrease aggregate demand.**
| Determinant | Change Required to Decrease AD |
|-----------------------------------------------------------------------|--------------------------------|
| Interest rates | |
| Domestic currency value relative to the foreign currency | |
| Consumer expectations about future profitability | |
| Government spending | |
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