ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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negative ____ net exports
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negative ____ real GDP
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positive ____ the interest rate
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positive ____ people’s spending on goods and services
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Detailed explanation-1: -Recall that a downward sloping aggregate demand curve means that as the price level drops, the quantity of output demanded increases. Similarly, as the price level drops, the national income increases.
Detailed explanation-2: -A demand curve is a straight line, sloping downwards, at an angle of 45 degrees. We can conclude that its price elasticity is 1. It means that the demand is unit elastic. A straight line with an angle of 45 degrees means that the change in quantity demanded is proportionally equal to change in its price.
Detailed explanation-3: -Generally, the demand curve slopes downward (i.e.its slope is negative) because the number of unit demands increases with a fall in price and vice versa. Higher price results in lower demand whereas low price results in higher demand.
Detailed explanation-4: -Answer and Explanation: The aggregate demand curve is downward sloping because of a. the interest rate effect. As the price decreases-which means less money is demanded to buy things-we are using less cash, so the money supply demand for cash decreases.