Explain the three reasons the aggregate demand curve slopes downward
What will be an ideal response?
The three reasons are the wealth effect, the interest-rate effect, and the international-trade effect. In the wealth effect, an increase in the price level decreases the real value of household wealth, which decreases consumption. In the interest-rate effect, an increase in the price level raises interest rates, which decreases investment spending and consumption spending, particularly on durable goods. In the international-trade effect, an increase in the price level makes U.S. exports more expensive and foreign imports less expensive, which decreases net exports.
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Suppose a sushi restaurant is making significant economic profit in the short run. In the long run
A) more people will open sushi restaurants, reducing the economic profit for each restaurant. B) high barriers to entry keep people from opening sushi restaurants. C) the government will require the sushi restaurant to sell part of its interests in the city. D) more people will open steak restaurants, increasing the economic profit for the sushi restaurant.
What are the two parts of the economic problem? a. economics explains many things, but only things that are related directly to money
b. natural resources are scarce but human-made resources are not. c. scarcity forces us to choose and choices are costly because we must give up other opportunities that we value. d. we have unlimited wants and unlimited resources.