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Solved: Determine the effect on aggregate demand of each of the following events
Chapter 0, Problem 1(choose chapter or problem)
Determine the effect on aggregate demand of each of the following events. Explain whether it represents a movement along the aggregate demand curve (up or down) or a shift of the curve (leftward or rightward). a. a rise in the interest rate caused by a change in monetary policy b. a fall in the real value of money in the economy due to a higher aggregate price level c. news of a worse-than-expected job market next year d. a fall in tax rates e. a rise in the real value of assets in the economy due to a lower aggregate price level f. a rise in the real value of assets in the economy due to a surge in real estate values
Questions & Answers
QUESTION:
Determine the effect on aggregate demand of each of the following events. Explain whether it represents a movement along the aggregate demand curve (up or down) or a shift of the curve (leftward or rightward). a. a rise in the interest rate caused by a change in monetary policy b. a fall in the real value of money in the economy due to a higher aggregate price level c. news of a worse-than-expected job market next year d. a fall in tax rates e. a rise in the real value of assets in the economy due to a lower aggregate price level f. a rise in the real value of assets in the economy due to a surge in real estate values
ANSWER:Step 1 of 2
a. The aggregate demand curve shifts leftwards.
b. The equilibrium point moves up along the aggregate demand curve.
c. The aggregate demand curve shifts leftwards.
d. The aggregate demand curve shifts rightwards.
e. The equilibrium point moves down along the aggregate demand curve.
f. The aggregate demand curve shifts rightwards.