Span 3 CAC

The immediate-short-run aggregate supply curve represents circumstances where:

both input and output prices are fixed

The aggregate demand curve is..

downsloping because of the interest-rate, real-balances, and foreign purchases effects.

determinants of aggregate demand

explain shifts in the aggregate demand curve.

real balence effect

higher price will DECREASE real value of assets

immediate-short-run aggregate supply curve

horizontal

rightward shift in ag-s curve is increase

in productivity

In an effort to avoid recession, the government implements a tax rebate program, effectively cutting taxes for households. We would expect this to:

increase AG-d

the short run ag-s represents circumstances

input prices are fixed, output are flexible

A DECLINE in investment will shift the AD curve to the:

left by a multiple of the change in investment

foreign purchase effect suggests that the INCREASE in US price level relative to other countries

INCREASE US imports DECREASE US exports

interest rate effect

INCREASES in price level, INCREASES demand for money, INCREASES interest rate, DECREASES consumption and spending

foreign purchases effect

moves the economy along a fixed aggregate demand curve.

the determinants of ag-s curve

resource prices resource productivity

INCREASE net exports will shift Ag-d to?

right by a multiple of change in net exports

The Aggregate Demand curve..

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

real balance, interest rate, foreign purchase

why aggregate demand is downsloping

in diagram, long run AG-s is shown by

1, vertical

immediate short run ad-s in diagram is shown by

3, horizontal

in diagram,AG-d

4, downsloping