ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
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lower prices increase the value of money holdings and consumer spending increases
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lower prices decrease the value of money holdings and consumer spending decreases.
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lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
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Detailed explanation-1: -Explanation: the aggregate demand curve slopes downward lies in the relationship between interest rates and investment. A lower price level lowers the demand for money, because less money is required to buy a given quantity of goods.
Detailed explanation-2: -It slopes downward because of the wealth effect on consumption, the interest rate effect on investment, and the international trade effect on net exports. The aggregate demand curve shifts when the quantity of real GDP demanded at each price level changes.
Detailed explanation-3: -(Higher interest rates have the opposite effect on demand and inflation). Lower interest rates increases aggregate demand by stimulating spending. But it can take a while for the supply of goods and services to respond because more workers, equipment and infrastructure may be required to produce them.
Detailed explanation-4: -This downward slope indicates that increases in the price level of outputs lead to a lower quantity of total spending. The graph shows a downward sloping aggregate demand curve, showing that, as the price level rises, the amount of total spending on domestic goods and services declines.
Detailed explanation-5: -The IS curve is downward sloping. When the interest rate falls, investment demand increases, and this increase causes a multiplier effect on consumption, so national income and product rises.