The following graph shows an increase in aggregate demand in a hypothetical country. Specifically, aggregate demand shifts to the right from AD₁ to AD2₂, causing the quantity of output demanded to rise at all price levels. For example, at a price level of 140, output is now $400 billion, where previously it was $300 billion. PRICE LEVEL 170 160 150 140 120 110 100 90 0 100 AD2 200 300 400 500 OUTPUT (Billions of dollars) AD₁ 600 700 800 ?
The following graph shows an increase in aggregate demand in a hypothetical country. Specifically, aggregate demand shifts to the right from AD₁ to AD2₂, causing the quantity of output demanded to rise at all price levels. For example, at a price level of 140, output is now $400 billion, where previously it was $300 billion. PRICE LEVEL 170 160 150 140 120 110 100 90 0 100 AD2 200 300 400 500 OUTPUT (Billions of dollars) AD₁ 600 700 800 ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Answer choices for blanks:
Blank 1: Improve, Worsen
Blank 2: Increase, Decrease
Blank 3: Increase, Decrease
Blank 4: Increase, Decrease
Transcribed Image Text:The following graph shows an increase in aggregate demand in a hypothetical country. Specifically, aggregate demand shifts to the right from AD₁ to
AD2, causing the quantity of output demanded to rise at all price levels. For example, at a price level of 140, output is now $400 billion, where
previously it was $300 billion.
PRICE LEVEL
170
160
150
140
130
120
110
100
90
0
100
+--+
I I
200 300
400 500
OUTPUT (Billions of dollars)
AD2
AD1
600
700
800
Transcribed Image Text:The following table lists several determinants of aggregate demand.
Complete the table by indicating the change in each determinant necessary to increase aggregate demand.
Change Needed to Increase Aggregate Demand
Consumer Expectations
Government Purchases
Business Expectations About Future Sales
Incomes in Other Countries
Expert Solution
Step 1
The aggregate demand and aggregate supply are the factor which determines the equilibrium level.
where AD = AS at this point is called equilibrium.
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