Question

The drop-down box is the options for the following questions:

Aggregate Demand (AD). Explain whether each of the following events would cause a movement on the AD curve "up and left" or "down and right," or a shift of the AD curve "left" or "right," other things being equal. In each case, identify the direction of the movement on the curve or direction of the shift in the curve's position. People have less security about ✓ Choose ] jobs and future income movement up and left on AD curve AD shift left New energy technologies have movement down and right on AD curve been discovered making AD shift right renewable energy production and transport less expensive than fossil fuel production and transport The dollar is weaker. The foreign exchange value of the dollar has dropped. Choose Choose] < There has been a significant reduction of unnecessary regulatory impediments in most major industries. < [Choose] Meaningful and lasting improvements in training and education of the work force have been made by large technology companies that reduce labor costs, labor turnover costs, and improve labor productivity

Answer 1

Remember Y=AD=C+I+G+NX

Less security about jobs and future income, make people save more and consumer less at present. Thus aggregate demand falls. AD shifts left.

This new technology will invite newer investments towards renewable energy and transport. Thus investments will increase AD. AD shifts right.

As dollar is weaker, meaning foreign currency has appreciated. Thus our exports will become cheaper to foreign while imports become dearer. Thus there is rise in net exports. AD increases, AD shifts right.

Reduction in unnecessary regulatory impediments will make the production process smoother and cheaper at the given market prices. The aggregate supply will increase. Due to this there will be movement down and right on AD curve to higher output and lower prices.

As labor productivity rises, there is increasing capacity to produce more goods. The aggregate supply curve shifts. There is a movement along the AD curve to higher output and lower prices. There will be movement down and right on AD curve.