Why the aggregate demands curve slopes downward ToolspspsFI@B2WF2PRICE LEVEL30²160150500, 120B71III140130120110100900#3100As the price level falls, the cost of borrowing money willThis phenomenon is known as theF20080F3OUTPUT (Billions of dollars)Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchangemarkets. The number of domestic products purchased by foreigners (exports) will thereforeproducts purchased by domestic consumers and firms (imports) will, and the number of foreigncausing the quantity of domestic output demanded to300 400 500 600 700$4QF4R%5AD2F5T^8006F6, causing the quantity of output demanded toeffect.MacBook AirY&7▼ Net exports will thereforeThis phenomenon is known as the«F7U*8DIIFB(9DDF9O)0effect.F10?PF11+=F12AbongeA-Zdelete 2. Why the aggregate demand curve slopes downward.The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of outputdemanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity ofoutput demanded rises to $500 billion.2WF2170160PRICE LEVEL15014013012011010090#30E80F3100200 300$4aF4*500, 120500400OUTPUT (Billions of dollars)Rer dº%15B600IFSTAD7006800MacBook AirsiF6Y&7?F7U008FB-(9DDFOO)0F10P-F11+ 11{[F12110x1bangeAOSA-Zताईdelete1

Aggregate demand is a downward sloping curve indicating an inverse relationship between the price…

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Why the aggregate demands curve slopes downward

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Why the aggregate demands curve slopes downward

Tools
ps
ps
FI
@
B
2
W
F2
PRICE LEVEL
30²
160
150
500, 120
B
71
I
I
I
140
130
120
110
100
90
0
#
3
100
As the price level falls, the cost of borrowing money will
This phenomenon is known as the
F
200
80
F3
OUTPUT (Billions of dollars)
Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange
markets. The number of domestic products purchased by foreigners (exports) will therefore
products purchased by domestic consumers and firms (imports) will
, and the number of foreign
causing the quantity of domestic output demanded to
300 400 500 600 700
$
4
Q
F4
R
%
5
AD
2
F5
T
^
800
6
F6
, causing the quantity of output demanded to
effect.
MacBook Air
Y
&
7
▼ Net exports will therefore
This phenomenon is known as the
«
F7
U
*
8
DII
FB
(
9
DD
F9
O
)
0
effect.
F10
?
P
F11
+
=
F12
A
bonge
A-Z
delete

2. Why the aggregate demand curve slopes downward.
The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of output
demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of
output demanded rises to $500 billion.
2
W
F2
170
160
PRICE LEVEL
150
140
130
120
110
100
90
#
3
0
E
80
F3
100
200 300
$
4
a
F4
*
500, 120
500
400
OUTPUT (Billions of dollars)
R
er dº
%
1
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B
600
I
FS
T
AD
700
6
800
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Indicate how each of the following events would affect the aggregate demand AD curve: a short-run decrease in the price level an increase in consumer confidence on the price level and real GDP an increase in government purchases
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