econ 181

posted by .

1. The three reasons for the downward slope of the aggregated demand curve are measured in effect. They are: Real Balances-this is caused by a change in the price levels. Next are Interest Rates-here high price levels increases the demand for money. When the supply is fixed the demand drives up the price. This price is the interest rate. Foreign Purchases-occur when the United States price levels increase relative to those overseas (and the exchange doesn't respond fast enough or completely), then the foreign markets buy more foreign goods. This reduces the number of US goods and creates a rise in exports.
2. The three major factors that can cause a shift in the aggregated supply curve are: Changes in Consumer Spending, which deals with price changes. Investment Spending is the plying of capital goods. Government Spending is the increase in it's purchases, a shift in the curve, as long as taxes and interest rates don't change as a result.

Hummmmmmm. What, exactly are the questions you are trying to answer.

In 1) I sense you are confused between aggregate demand for goods and services and aggregate demand for money. Demand curves are simply relationships between price and quantity. (The price of holding money is the interest rate). Demand curves are downward sloping because at higher prices, people want to hold/consume less.

In 2) changes in consumer spending changes the aggregate demand curve, not supply. Changes in investment spending, in the short run, are also changes to aggregate demand. Government spending is also a component of aggregate demand.
Factors that affect supply are levels of technology, levels of factors of production (labor, capital, natural resources), etc.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Macro econ

    Why does the supply of saving slope upward?
  2. Macroeconomics

    Suppose the Fed wishes to use monetary policy to close an expansionary gap. a. Should the Fed increase or decrease the money supply?
  3. econ

    my mind is going blank here..can someone chime in and help: If a new breakthrough in manufacturing technology reduces the cost of producing cd players by half, what will happen to the demand for cd players?
  4. econ

    If the price of a good increases, what happens to demand?
  5. econ

    in what ways do the reasons that explain the downward slope of the aggregate demand curve differ from the reasons that explain the slope of the demand curve for a single product?
  6. macroeconomics

    1 The most important reason for the slope of the aggregate demand curve is that as the price level _______. 1) increases, interest rates decrease, and investment increases 2) decreases, interest rates decrease, and investment decreases …
  7. Economics

    1. What effect would a decrease in consumer savings have on the aggregate demand curve?
  8. macroeconomics

    In each of the following cases, either a recessionary gap or inflationary gap exists. Assume that the aggregated supply curve is horizontal so that the change in real GDP arising from a shift of the aggregated demand curve equals the …
  9. economics

    Consider an economy with the production function L^(1/3) a) Derive the Labor demand Curve b) If Labor supply curve is L^s= (w/p), calculate the equilibrium levels of real wage, labor and output. c) Assume M^s= 45 and k=3 . What is …
  10. ECON

    The demand curve for haircuts at Terry’s Hair Design is P=20-0.20Q Where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of $15.00. Terry is unwilling …

More Similar Questions