EBK MACROECONOMICS
5th Edition
ISBN: 8220106773925
Author: KRUGMAN
Publisher: MAC HIGHER
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Chapter 12, Problem 1P
To determine
Concept Introduction:
Aggregate
Shift in Aggregate Demand Curve: There are several factors on which the shifting of demand curve depends. Some of them are:
- Changes in expectation: When consumers are more confident about future then AD curve shifts in the right direction and vice versa.
- Changes in wealth: When the wealth of individual increases means real value of assets increases then the AD curve shifts in right direction and when it decreases then it shifts leftward.
- Size of stock of physical capital: When the size of stock is small then AD curve shifts rightward and vice versa.
- Fiscal policy: It includes government expenditure and taxes. When government expenditure is increased or taxes are decreased then AD curve shifts rightward and vice versa.
Monetary policy: It includes money supply changes. When money supply increases AD curve shifts rightward and vice versa.
Depreciation: It is defined as the reduction in the value of currencies. It leads to increase in export of domestic goods and services. Consider value of $1 is equal to INR 60. If value of $ decreases to INR 50 then dollar has
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