ch 32 Econ

If the price level decreases, then the aggregate expenditures schedule will shift. This translates into a

movement down along the aggregate demand curve.

the labels for axes of an aggregate supply curve should be

real domestic output for the horizontal axis and price level for the vertical axis

If investment increases by $10 billion and the economy's MPC is 0.8, the aggregate demand curve will shift

rightward by $50 billion at each price level

Graphically, demand-pull inflation is shown as a:

rightward shift of the AD curve along an upsloping AS curve.

table

whats the point

the real life balances effect indicates that

a higher price level will decrease the real value of many financial assets and therefore reduce spending.

An increase in investment and government spending can be expected to shift the

aggregate expenditures curve upward and the aggregate demand curve rightward.

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other things equal, a decrease in the real interest rate will

expand investment and shift the AD curve to the right

the immediate short run aggregate supply curve is

horizontal

The foreign purchases effect suggests that a decrease in the U.S. price level relative to other countries will

increase US exports and decrease US imports

the aggregate demand curve

shows the amount of real output that will be purchased at each possible price level.