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Homework answers / question archive / Use the graph below to answer the questions that follow
Use the graph below to answer the questions that follow. i Aggregate Demand F Price Level G AD 2 (20,30) AD1 "AD 3 Real GDP
a. A decrease in taxes. This results in a: O movement from point G to point F. O shift from AD1 to AD2. O shift from AD1 to AD3. O movement from point F to point G. b. Workers worry that they will see a reduction in the number of hours worked. This results in a: O movement from point F to point G. O movement from point G to point F. O shift from AD1 to AD 2 O shift from AD1 to AD3. c. The price level in the economy increases. This results in a: O shift from AD1 to AD3. O shift from AD1 to AD2. O movement from point F to point G. O movement from point G to point F.
d. Real interest rates in the economy increase. This results in a: O shift from AD1 to AD3. shift from AD1 to AD2 movement from point G to point F. movement from point F to point G. e. The expected rate of return on investments increases. This results in a: O movement from point F to point G. O shift from AD1 to AD3. O movement from point G to point F. shift from AD1 to AD2
According to the given graph,
a. A decrease in taxes will increase the disposable income of household that, in turn, encourage them to make more demand in the economy. Hence, there will be????? shift from AD1 to AD2.
b. Workers are worried about a reduction in working hours that, in turn, reduces there income level. This decrease in income level will reduce aggregate demand in the economy. As a result, there will be shift from AD1 to AD3.
c. An increase in price will result in an upward movement on the curve that, in turn, reduces quantity demanded by consumers. Therefore, there will be movement from pont G to point F.
d. Increased real interest rate will increase the savings by the consumers due to which they maker lesser demand. As a result, aggregate demand curve will shift from AD1 to AD3.
e. When people expect increased interest rate on investment, they will consume more today and less in the near future when rate of return increase. As a result, aggregate demand increases in the economy. Hence, aggregate demand curve will shift from AD1 to AD2.
