Question

True or False: The reasons for the downward slope of an aggregate demand curve include the real balances effect, the interest-rate effect, and the net exports effect. True O False Although the AD and market demand curves are both downward sloping, the two concepts are different because the AD curve deals with prices and a ー, while the market demand curve deals with prices and a For each scenario in the following table, indicate whether the aggregate demand curve will shift left or right or will not shift Shift Scenario Consumers expect an economic boom A new U .S. president is elected, and business executives become pessimistic about the profit expectations The federal government increases spending for highways, bridges, and other infrastructure The United States increases exports of wheat and other crops to Russia, Ukraine, and other former Soviet republics.

Answer 1

(1) True

Downward slope of AD curve is explained by all three of these effects.

(2) Please provide the drop-down options for exact wording. But the following sentence is also correct that I answer here:

The two concepts are different because AD curve deals with aggregate (generalized) prices and aggregate quantity of real GDP (output) demanded in the entire economy, while market demand curve deals with single-good prices and a single-market total quantity demanded.

(3)

(a) Consumers expected economic boom - Right shift (since consumption demand will rise, increasing AD)

(b) Businesses become pessimistic - Left shift (since investment demand will fall, decreasing AD)

(c) Fed increases spending - Right shift (since government spending will rise, increasing AD)

(d) US increases exports - Right shift (since net exports will rise, increasing AD)