only answers QUESTION The aggregate demand curve (AD) shows which of the followi
ID: 1119545 • Letter: O
Question
only answers
QUESTION The aggregate demand curve (AD) shows which of the following relationships? a. Higher rates of interest are associated with lower levels of output. D.Lower rates of inflation are associated with higher interest rates. c. Higher rates of inflation are associated with lower levels of total demand. Od. Lower rates of inflation are associated with lower levels of total demand. e. Higher rates of inflation are associated with higher interest rates. QUESTION 2 Which one of the following statements describes why the aggregate demand (AD) curve slopes downward? a. As inflation rises, real wealth declines, so people tend to demand less goods and services b. As inflation rises, the real money supply declines, raising interest rates and discouraging investment. C.As inflation rises the Fed will tend to raise interest rates, which reduces investment and aggregate demand. d. As inflation rises, exports become more expensive and imports become more attractive to domestic consumers, lowering aggregate demand e. All of the above. QUESTION 3 Which one of the following would NOT cause a shift in the aggregate demand (AD) curve? a. An increase in inflation b. An increase in autonomous consumption c. An increase in net exports d. An increase in government spending e. An increase in autonomous investmentExplanation / Answer
1.
Option C.
This is because the AD curve shows the inverse relationship between price and real GDP.
A higher level of inflation is associated with the lower level total demand.
2.
The aggregate demand curve is downward sloping due to the real wealth effect, the interest rate effect, and the open economy effect.
Since the given all option, a b, c and d are the reason which describes why the AD curve is downward sloping.
Hence option e is the correct answer.
3.
Option a is the correct answer.
This is because, with the change in the inflation rate, there will be moved along the AD curve and not the shift of the AD curve.
The AD curve shift due to change in the autonomous spending, and government expenditure.
4.
Option c is the correct answer.
As the output increase the Fed increase inflation rate, so the interest rate will decrease, therefore it is more profitable to invest, therefore firm will invest more and as a result Aggregate supply of goods increases, and therefore with the increase in the inflation rate the AS supply increases. This is the reason that AS curve is upward sloping.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.