Aggregate Demand Curve ( AD ): It shows how price and the quantity demanded are related to each other. The curve is negatively slopped which means that when prices rise the quantity demanded falls. 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. Inflation indexed bond: It is a type of bond in which the rate of interest gets adjusted according to existing inflation in the economy.

Question

Want to see the full answer?

Answer 1

Question

Chapter 12, Problem 5P

To determine

Concept Introduction:

Aggregate Demand Curve ( AD ): It shows how price and the quantity demanded are related to each other. The curve is negatively slopped which means that when prices rise the quantity demanded falls.

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.

Inflation indexed bond: It is a type of bond in which the rate of interest gets adjusted according to existing inflation in the economy.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Sue is a sole proprietor of her own sewing business. Revenues are $150,000 per year and raw material (cloth, thread) costs are $130,000 per year. Sue pays herself a salary of $60,000 per year but gave up a job with a salary of $80,000 to run the business. ○ A. Her accounting profits are $0. Her economic profits are - $60,000. ○ B. Her accounting profits are $0. Her economic profits are - $40,000. ○ C. Her accounting profits are - $40,000. Her economic profits are - $60,000. ○ D. Her accounting profits are - $60,000. Her economic profits are -$40,000.

Select a number that describes the type of firm organization indicated. Descriptions of Firm Organizations: 1. has one owner-manager who is personally responsible for all aspects of the business, including its debts 2. one type of partner takes part in managing the firm and is personally liable for the firm's actions and debts, and the other type of partner takes no part in the management of the firm and risks only the money that they have invested 3. owners are not personally responsible for anything that is done in the name of the firm 4. owned by the government but is usually under the direction of a more or less independent, state-appointed board 5. established with the explicit objective of providing goods or services but only in a manner that just covers its costs 6. has two or more joint owners, each of whom is personally responsible for all of the partnership's debts Type of Firm Organization a. limited partnership b. single proprietorship c. corporation Correct Number

The table below provides the total revenues and costs for a small landscaping company in a recent year. Total Revenues ($) 250,000 Total Costs ($) - wages and salaries 100,000 -risk-free return of 2% on owner's capital of $25,000 500 -interest on bank loan 1,000 - cost of supplies 27,000 - depreciation of capital equipment 8,000 - additional wages the owner could have earned in next best alternative 30,000 -risk premium of 4% on owner's capital of $25,000 1,000 The economic profits for this firm are ○ A. $83,000. B. $82,500. OC. $114,000. OD. $83,500. ○ E. $112,500.