NAME: 1. What are the factors that affect the amounts that consumers, businesses

Question

NAME: 1. What are the factors that affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the: (1point) 2. If investment increases by $20 billion and the economy's MPC is .75, the aggregate dema curve will shift rightward or leftward and by how much? (4points). Show your calculations 3. Suppose that technological advancements stimulate $20 billion in additional investment spending. If the MPC 0.4, how much will the change in investment increase aggregate demand? (4points). Show your calculations

Explanation / Answer

1) the factors that affect the amount that consumers, businesses, government, and foreigners wish to purchase at each price level are the determinants of aggregate demand.

2) aggregate demand curve will shift rightward by $80.
aggegate demand = investment * (1/1-MPC)
= 20 * (1/1-0.75)
= 20 * 4
= $80

3) aggegate demand = technology investment * (1/1-MPC)
= 20 * (1/1-0.4)
= 20 * 1.66
= $33.33

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