ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Changes in the price level
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The determinents of aggregate demand
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Changes in the quantity of output demanded
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Chnages in legal and political policies
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Detailed explanation-1: -Along the AD curve, real GDP increases and the price level decreases. In other words, AD slopes down. Changes in the price level will cause a movement along the AD curve.
Detailed explanation-2: -The aggregate demand curve, or AD curve, shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.
Detailed explanation-3: -Price is the main cause of movements along the aggregate demand curve. When the price level rises, the real money supply declines, forcing the interest rates to rise. Due to high interest rates, investments and savings reduce, thus lowering income levels for a short period of time.