Explain the intuition behind why the aggregate demand curve is downward sloping. Why does an increase in the money supply shift the aggregate demand curve to the right?
What will be an ideal response?
According to the quantity theory, holding the velocity and supply for money constant, a lower price level means that the same level of money can conduct more transactions, so the level of transactions increases. An increase in the money supply means that a higher level of transactions can be supported for every value of the price level.
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Qualifying for admission to the Eurozone requires a nation to:
A) petition for membership with the European parliament. B) demonstrate a commitment to democratic principles and take an antiterrorist stance. C) peg its exchange rates to the euro and demonstrate fiscal responsibility for a length of time. D) join the IMF and the UN, and be recommended by other members.
In Figure 4.4, supply is perfectly inelastic in graph:
A. A. B. B. C. C. D. D.