Changes to SRAD

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  • 1. 1. Aggregate Demand may be measured by adding: A. consumption, investment, savings and imports B. Saving, government spending and business inventories C. consumption, investment, government spending and net exports D. Domestic private expenditures and government spending E. Domestic expenditures and imports 2. Why do you think Congress has yet to adopt a contractionary fiscal policy?
  • 2. SRAS: Total of all goods firms are willing to supply the national economy SRAD: Total of all goods firms are willing to supply the national economy
  • 3. Tyler Cowen
  • 4. Why slopes downward Price & Quantity changes
  • 5. Reason #1 Wealth Effect Fiat currency $$ = what it can buy Cheaper price buys more goods When prices change, value of money changes  Flat screen tvs?  Healthcare?
  • 6. Reason #2 Investment Effect Price level falls , consumers can/will save more Interest rate decrease causes more business investment  Machinery  Roth IRA accounts
  • 7. Reason #3 Exchange Rate Effect Depreciation of $$, leads to more expensive foreign goods Effect on imports? Effect on price level?  Euro vs. US$  Peso vs. US$  Race to devalue
  • 8. Changes to Aggregate Demand Pages 729-730 Choose: For each shift of AD curve, explain, give example of left and right by drawing a picture, sketch graphs (small poster for wall)