Question

14. no cursive please

14. Describe the effect of the following events would on the aggregate demand (AD) curve in the U.S. Answer with SR- shifts right, SL-shifts left, MU-move up curve, or MD-move down curve. (a) A boost in research and development by computer companies produces more powerful and efficient computers and equipment. ans. (b) Income falls in several countries that trade heavily with the U.S. ans: (c) Prices fall in the economy ans: (d) After a budget surplus, Congress moves to cut personal income taxes ans:

Answer 1

Answer : a) The aggregate demand curve "shift to right". Because when company produce more powerful and efficient computers and equipment then the demand for these computers and equipment increase. As a result, the aggregate demand increase which shift the aggregate demand curve to rightward.

b) The aggregate demand curve "shift to left". Because when countries income level decrease who are heavily trading with U.S. then the demand for U.S. goods and services decrease. As a result, the U.S. aggregate demand decrease which shift the aggregate demand curve to leftward.

c) Here the aggregate demand curve is a "move down curve". Because when price level fall then quantity demanded increase. As a result, with falling price level the aggregate demand curve become a move down curve.

d) The aggregate demand curve "shift to right". Because when income tax decrease then peoples real income increase. Due to increasing real income people buy more at existing price level. As a result, the aggregate demand increase which shift the aggregate demand curve to rightward.