Why does the aggregate demand curve slope downward?
What will be an ideal response?
The effect of higher prices on consumer wealth is one of several reasons why the aggregate demand curve slopes downward. Higher prices decrease the demand for goods and services because they erode the purchasing power of consumer wealth. Conversely, lower prices increase the demand for goods and services by enhancing the purchasing power of consumer wealth. Second reason comes from international trade. High domestic prices will depress a country’s export and stimulate imports. This will shift total expenditure curve downward and lower the real GDP.
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Which of the following statements about the importance of trade to the U.S. economy is true?
A) Overall, about 80 percent of U.S. manufacturing jobs depend directly or indirectly on exports. B) The United States is the second largest exporter in the world. C) The U.S. economy is highly dependent on international trade for growth in its gross domestic product. D) Since 1950, both exports and imports have steadily decreased as a fraction of U.S. gross domestic product.
Which of the following statements is true?
A) In a world of efficiently used scarce resources, more of one good necessarily means less of some other good. B) The law of increasing opportunity costs assumes that all people have the same ability to produce goods. C) Efficiency implies that it is impossible to get more of one good without getting less of another. D) Even if a country has unemployed resources, it can still be operating on its production possibilities frontier (PPF). E) a and c