Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 8, Problem 1QP
To determine
Explain that the aggregate
Expert Solution & Answer
Explanation of Solution
Aggregate demand is a sum of the total demand of the final goods and services demanded by the economy, or it is real GDP households that are willing to buy at a different level of
In this case, it is not correct to say that $9 trillion is aggregate demand because the aggregate demand curve determines many points not just one.
Economics Concept Introduction
Aggregate demand: Aggregate demand is a sum of the total demand of final goods and services demanded by economy as a whole for a particular period of time.
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Students have asked these similar questions
Is aggregate demand a specific dollar amount?. For example would it be correct to say aggregate demand of Ghana is $67.077 billion?. Explain your answer.
What is the difference between a movement along the aggregate demand curve and a shift of the aggregate demand curve?
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.
170
100
180
140
130
120
110
AD
100
00
100
200
300
400 B00
700
OUTPUT (Billians of dollars)
As the price level falls, the cost of borrowing money will
, causing the quantity of output demanded to
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
and the number of foreign
products purchased by domestic consumers and firms (imports) will
Net exports will therefore
causing the quantity of domestic output demanded to
Chapter 8 Solutions
Economics (MindTap Course List)
Ch. 8.2 - Prob. 1STCh. 8.2 - Prob. 2STCh. 8.2 - The money supply has risen, but total spending has...Ch. 8.3 - Prob. 1STCh. 8.3 - Prob. 2STCh. 8.3 - Prob. 3STCh. 8.5 - Prob. 1STCh. 8.5 - Prob. 2STCh. 8 - Prob. 1QPCh. 8 - Prob. 2QP
Ch. 8 - Prob. 3QPCh. 8 - Prob. 4QPCh. 8 - Prob. 5QPCh. 8 - Prob. 6QPCh. 8 - Prob. 7QPCh. 8 - Prob. 8QPCh. 8 - Prob. 9QPCh. 8 - Prob. 10QPCh. 8 - Prob. 11QPCh. 8 - Prob. 12QPCh. 8 - Prob. 13QPCh. 8 - Prob. 14QPCh. 8 - Prob. 15QPCh. 8 - Prob. 16QPCh. 8 - Prob. 17QPCh. 8 - Prob. 18QPCh. 8 - Prob. 19QPCh. 8 - Prob. 20QPCh. 8 - Prob. 21QPCh. 8 - Prob. 1WNGCh. 8 - Prob. 2WNGCh. 8 - Prob. 3WNGCh. 8 - Prob. 4WNGCh. 8 - Prob. 5WNGCh. 8 - Prob. 6WNG
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Similar questions
- If there is an increase in government expenditures and an increase in taxes by an equal amount by how much will the aggregate demand increase?arrow_forwardThe following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 120, and the quantity of output demanded is $500 billion. Moving up along the aggregate demand curve from point A to point B, the price level rises to 140, and the quantity of output demanded falls to $300 billion. PRICE LEVEL 170 130 120 888 100 150 140 110 100 90 100 200 300 400 500 AD 600 700 600 OUTPUT (Billions of dollars)arrow_forwardSuppose that the price index of 150 for quantity demanded of US Real GDP is 10.0 trillion worth of goods. Do these data represent aggregate demand or a point on an aggregate demand curve? Explain your answer.arrow_forward
- will an increase in productivity affect the aggregate supply curve and the aggregate demand curve?arrow_forwardThe following graph shows the short-run and long-run aggregate supply curves (SRAS and LRAS) for an economy. Suppose there is a technological improvement that allows firms to reduce their costs of production permanently. Drag one or both of the curves on the graph to illustrate the long-term effects of this change. If you don't believe there will be any long-term effects, leave the curves where they are. 240 LRAS SRAS 200 SRAS 160 LRAS 120 80 40 6 12 18 24 REAL GDP (Trillions of dollars) Assuming aggregate demand is not affected by the technological improvement, the long-run effect of this v supply shock is v in aggregate output and v in the price level. PRICE LEVELarrow_forwardThe following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1AD1 to AD2AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion. The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change needed to decrease AD Wealth (increase/ decrease) Taxes (increase/ decrease) Expected rate of return on investment (increase/ decrease) Incomes in other countries (increase/ decrease)arrow_forward
- What are three factors that help explain the slope of the aggregate demand curve? What is the most important factor? Why?arrow_forwardExplain the factors that cause the Aggregate Demand curve to be downward sloping left to right.arrow_forwardHow do changes in expectations, fiscal policy and monetary policy, and the world economy change aggregate demand and the aggregate demand curve?arrow_forward
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