which of the following will decrease aggregate demand course hero

What happens to aggregate demand when the price level increases?

as the price level increases, the quantity of goods and services demanded falls. One reason the aggregate demand curve is downward sloping is the real balances effect, also called the income effect. This means: when the price level increases, the real value of cash holdings and income falls.

Why is the aggregate demand curve downward sloping?

One reason the aggregate demand curve is downward sloping is the real balances effect, also called the income effect. This means: when the price level increases, the real value of cash holdings and income falls. This decreases the purchasing power of peoples assets, and they're able to purchase less.

What is the equation for determining aggregate demand?

a decrease in foreign incomes, which leads to decreased exports. C + I + G + NX is the equation for determining aggregate demand. The letters stand for: consumption, investment, government expenditures on goods and services, and net exports.

When a higher price level decreases the purchasing power of money?

When a higher price level decreases the purchasing power of money saved, this is an example of: Income effect. Interest rate effect. Net exports effect. All of the options are correct.

Why is aggregate demand curve downward sloping?

This means: when the price level increases, the real value of cash holdings and income falls. This decreases the purchasing power of peoples assets, and they're able to purchase less.

Why is aggregate demand important?

The aggregate demand/aggregate supply model is popular because: -it provides fairly accurate predictions about the economy. -it works for both macroeconomics and microeconomics.

Why are high price levels associated with high levels of real GDP?

High price levels are associated with high levels of real GDP along an aggregate supply curve because: firms generally face increasing costs, and producing large amounts of additional output is only worthwhile when prices are high.

When an economy is operating at full capacity, what is the output?

When an economy is operating at full capacity: it is producing the output with the highest value possible. When the economy is on the flat portion of its AS curve: The economy is near full capacity. Small changes in the price level have little or no effect on the amount of production in the economy.

Does real GDP increase?

real GDP rises, eventually getting very close to the full-capacity level of RGDP. On an aggregate supply curve, as real GDP rises, an increase in the price level: has a smaller and smaller effect on the aggregate quantity of goods and services supplied.