Macroeconomics

Glenn Hubbard, Tony O'Brien

Chapter 13

Aggregate Demand and Aggregate Supply Analysis - all with Video Answers

Educators

Section 1

Aggregate Demand

Problem 1

What relationship does the aggregate demand curve show? What relationship does the aggregate supply curve show?

Achintya Suden

Achintya Suden

Numerade Educator

Problem 2

Explain the three reasons the aggregate demand curve slopes downward.

Jiapeng Guo

Numerade Educator

Problem 3

What are the differences between the AD curve and the demand curve for an individual product, such as apples?

Achintya Suden

Numerade Educator

Problem 4

What variables cause the AD curve to shift? For each variable, identify whether an increase in that variable will cause the AD curve to shift to the right or to the left and also indicate which component(s) of GDP -consumption, investment, government purchases, or net exports-will change.

Tina Pavlovich

Numerade Educator

Problem 5

Explain how each of the following events would affect the aggregate demand curve.
a. An increase in the price level
b. An increase in government purchases
c. Higher state income taxes
d. Higher interest rates
c. Faster income growth in other countries
f. A higher exchange rate between the dollar and foreign currencies

Achintya Suden

Numerade Educator

Problem 6

From August 2009 to August 2015 , the Standard \& Poor's Index of 500 stock prices more than doubled, while the consumer price index increased by just over 10 percent. Briefly explain what effect, if any, these changes had on the aggregate demand curve.

Tina Pavlovich

Numerade Educator

Problem 7

Consider the two aggregate demand curves in the following graph. What would cause a movement from point $A$ to point $B$ on $A D_{1} ?$ What would cause a movement from point $A$ to point $C$ ?

Achintya Suden

Numerade Educator

Problem 8

(Related to the Don't Let This Happen to You on page 437) An economics student makes the following statement: "It's easy to understand why the aggregate demand curve is downward sloping: When the price level increases, consumers substitute into less expensive products, which decreases total spending in the economy." Briefly explain whether you agree.

Tina Pavlovich

Numerade Educator

Problem 9

(Related to Solved Problem 13.1 on page 438 ) Explain whether each of the following will cause a shift of the AD curve or a movement along the AD curve.
a. Firms become more optimistic and increase their spending on machinery and equipment.
b. The federal government increases taxes in an attempt to reduce a budget deficit.
c. The U.S. economy experiences 4 percent inflation.

Achintya Suden

Numerade Educator

Problem 10

(Related to Solved Problem 13.1 on page 438 ) A reporter for the Wall Street Journal wrote, "A strong dollar and weak growth overseas portend downward pressure on U.S. exports."
a. What does the reporter mean by a "strong dollar"?
b. What does the reporter mean by "weak growth overseas"?
c. Briefly explain why the combination of a strong dollar and weak growth overseas might result in lower U.S. exports.
d. Will the result of a strong dollar be a movement along the U.S. aggregate demand curve or a shift of the aggregate demand curve? Briefly explain.

Tina Pavlovich

Numerade Educator

Problem 11

If real GDP in the United States declined by more during the $2007-2009$ recession than did real GDP in Canada, China, and other trading partners of the United States, would the effect be to increase or decrease U.S. net exports? Briefly explain.

Achintya Suden

Numerade Educator