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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Question

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Answer 1

Question

Chapter 16, Problem 1P

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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Expert Solution & Answer

Explanation of Solution

When the value of dollar against other currencies falls, the demand for goods produced in the U.S. increases due to rise in demands by foreigners. As a result, the aggregate demand curve would shift rightward.
It is because at the same price level foreigners can buy more goods however there is no change in demand by the people of the U.S.
The argument that the shift would take place in the downward direction is certainly wrong. As the demand for domestic goods have increased the AD curve will shift rightward.

Conclusion:

Thus, the argument is wrong as the shift would take place in rightward direction.

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Answer 2

Question

Chapter 16, Problem 1P

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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Expert Solution & Answer

Explanation of Solution

When the value of dollar against other currencies falls, the demand for goods produced in the U.S. increases due to rise in demands by foreigners. As a result, the aggregate demand curve would shift rightward.
It is because at the same price level foreigners can buy more goods however there is no change in demand by the people of the U.S.
The argument that the shift would take place in the downward direction is certainly wrong. As the demand for domestic goods have increased the AD curve will shift rightward.

Conclusion:

Thus, the argument is wrong as the shift would take place in rightward direction.

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Answer 3

Question

Chapter 16, Problem 1P

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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Expert Solution & Answer

Explanation of Solution

When the value of dollar against other currencies falls, the demand for goods produced in the U.S. increases due to rise in demands by foreigners. As a result, the aggregate demand curve would shift rightward.
It is because at the same price level foreigners can buy more goods however there is no change in demand by the people of the U.S.
The argument that the shift would take place in the downward direction is certainly wrong. As the demand for domestic goods have increased the AD curve will shift rightward.

Conclusion:

Thus, the argument is wrong as the shift would take place in rightward direction.

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Answer 4

Question

Chapter 16, Problem 1P

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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Expert Solution & Answer

Explanation of Solution

When the value of dollar against other currencies falls, the demand for goods produced in the U.S. increases due to rise in demands by foreigners. As a result, the aggregate demand curve would shift rightward.
It is because at the same price level foreigners can buy more goods however there is no change in demand by the people of the U.S.
The argument that the shift would take place in the downward direction is certainly wrong. As the demand for domestic goods have increased the AD curve will shift rightward.

Conclusion:

Thus, the argument is wrong as the shift would take place in rightward direction.

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Answer 5

Chapter 16, Problem 1P

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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Expert Solution & Answer

Explanation of Solution

When the value of dollar against other currencies falls, the demand for goods produced in the U.S. increases due to rise in demands by foreigners. As a result, the aggregate demand curve would shift rightward.
It is because at the same price level foreigners can buy more goods however there is no change in demand by the people of the U.S.
The argument that the shift would take place in the downward direction is certainly wrong. As the demand for domestic goods have increased the AD curve will shift rightward.

Conclusion:

Thus, the argument is wrong as the shift would take place in rightward direction.

Answer 6

Chapter 16, Problem 1P

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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Expert Solution & Answer

Explanation of Solution

When the value of dollar against other currencies falls, the demand for goods produced in the U.S. increases due to rise in demands by foreigners. As a result, the aggregate demand curve would shift rightward.
It is because at the same price level foreigners can buy more goods however there is no change in demand by the people of the U.S.
The argument that the shift would take place in the downward direction is certainly wrong. As the demand for domestic goods have increased the AD curve will shift rightward.

Conclusion:

Thus, the argument is wrong as the shift would take place in rightward direction.

Answer 7

Chapter 16, Problem 1P

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 an individual increases that means real value of assets increases then the AD curve shifts in right direction and when it decreases the curve 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 depreciated.

Answer 8

Expert Solution & Answer

Explanation of Solution

When the value of dollar against other currencies falls, the demand for goods produced in the U.S. increases due to rise in demands by foreigners. As a result, the aggregate demand curve would shift rightward.
It is because at the same price level foreigners can buy more goods however there is no change in demand by the people of the U.S.
The argument that the shift would take place in the downward direction is certainly wrong. As the demand for domestic goods have increased the AD curve will shift rightward.

Conclusion:

Thus, the argument is wrong as the shift would take place in rightward direction.