ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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left by a multiple of the change in investment.
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left by the same amount as the change in investment.
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right by the same amount as the change in investment.
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right by a multiple of the change in investment.
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Detailed explanation-1: -A decline in investment will shift the AD curve to the: left by a multiple of the change in investment. An increase in net exports will shift the AD curve to the: right by a multiple of the change in investment.
Detailed explanation-2: -Shifting the Aggregate Demand Curve The aggregate demand curve tends to shift to the left when total consumer spending declines. 2 Consumers might spend less because the cost of living is rising or because government taxes have increased.
Detailed explanation-3: -Increases in taxes will decrease consumption (and shift the AD curve to the left) while decreases in taxes will increase consumption and shift the AD curve to the right. Consumer expectations about the future of the economy can have a strong impact on consumptions.
Detailed explanation-4: -A reduction in investment would shift the aggregate demand curve to the left by an amount equal to the multiplier times the change in investment. The relationship between investment and interest rates is one key to the effectiveness of monetary policy to the economy.