3. Why the aggregate demand curve slopes downward The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $300 billion, and the price level is 140. Moving down along the AD curve from point X to point Y, the quantity of output demanded rises to $500 billion, and the price level falls to 120. (? 170 160 150 140 130 PRICE LEVEL 120 110 AD 100 0 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars)As the price level falls, the cost of borrowing moneyr will V , causing the quantity:r of output demanded to V . This phenomenon is known as the V effect. Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to V in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore V , and the number of foreign products purchased by domestic consumers and rms (imports) will V . Net exports will therefore V causing the quantity of domestic output demanded to V . This phenomenon is Known as the V effect. As the price level falls. the cost of borrowing moneyr will V , causing the quantity of output demanded to V . This phenomenon is Known as V effect. Additionally, as the price level falls, the impact on the d remain the same will cause the real value of the dollar to V in foreign exchange markets. The number of domestic products purchased b .) will therefore V , and the number of foreign products purchased by domestic consumers and rms (i V . Net exports will therefore V causing the quantity of domestic output demanded to V . This phenomenon is known as the V effect. As the price level falls. the cost of borrowing moneyr will V , causing the quantity of output demanded to V . This phenomenon is Known as the V effect. urice level falls, the impact on the domestic interest rate will cause the real value of the dollar to V in foreign exchange fa|| r of domestic products purchased by foreigners (exports) will therefore V , and the number of foreign by domestic consumers and firms (imports) will V . Net exports will therefore V , remain the same _ _ _ of domestic output demanded to V . This phenomenon Is known as the V effect. As the price level falls, the cost of borrowing moneyr will V , causing the quantityr of output demanded to V . This phenomenon is known as the V effect. exchange rate Additionally, as the price level falls, the impact on the dome ill cause the real value of the dollar to V in foreign exchange markets. The number of domestic products purchased by for interest rate will therefore V , and the number of foreign products purchased by domestic consumers and rms (impo V . Net exports will therefore V wealth causing the quantity of domestic output demanded to . This phenomenon is Known as the V effect. Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to V in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore V - number of foreign products purchased by domestic consumers and rms (imports) will V . Net exports will theref causing the quantity of domestic output demanded to V . This phenomenon is known as the V effect. rise As the price level falls, the cost of borrowing moneyr will V , causing t demanded to V . This phenomenon is known as the V effect. fall remain the same Additionally. as the price level falls, the impact on the domestic interest rate will cause the r r to V in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore V , and the number of foreign products purchased by domestic consumers and rms (imports) will V . Net exports will therefore V causing the quantity of domestic output demanded to V . This phenomenon is known as the V effect. As the price level falls. the cost of borrowing money will g the quantity of output demanded to . _ rise V . This phenomenon Is known as the fall Additionally, as the price level falls, the impact on the domestic inte e real value of the dollar to V in foreign exchange ore I V , and the number of foreign products purchased by domestic consumers and firms (imports) will V . Net exports will therefore V remain the same markets. The number of domestic products purchased by foreigners causing the quantity of domestic output demanded to V . This phenomenon is Known as the V effect. As the price level fallsr the cost of borrowing moneyr will V , causing the quantity of output deman V . This phenomenon is Known as the V effect. Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to markets. The number of domestic products purchased by foreigners (exports) will therefore V , a products purchased by domestic consumers and rms (imports) will V . Net exports will therefore causing the quantity of domestic output demanded to V . This phenomenon is known as the As the price level falls, the cost of borrowing money will causing the quantity of output demanded to . This phenomenon is known effect. fall Additionally, as the price level falls, the impact on the remain the same te will cause the real value of the dollar to i in foreign exchange markets. The number of domestic products purchased orts) will therefore , and the number of foreign rise products purchased by domestic consumers and firms . Net exports will therefore causing the quantity of domestic output demanded to . This phenomenon is known as the effect.As the price level falls, the cost of borrowing moneyr will V , causing the quantityr of output demanded to V . This phenomenon is known as the V effect. exchange rate Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar interest rate exchange markets. The number of domestic products purchased by foreigners (exports) will therefore er of foreign wealth v products purchased by domestic consumers and rms (imports) will V . Net exports will the , causing the quantity of domestic output demanded to V . This phenomenon is Known as the 1 effect. 4. Determinants of aggregate demand The graph below is associated with a hypothetical country. Consider an increase in aggregate demand (AD). Specifically, aggregate demand shifts to the right from AD, to AD2, causing the quantity of output demanded to rise at each price level. For instance, at a price level of 140, output is now $400 billion, where initially it was $300 billion. 170 160 150 140 130 PRICE LEVEL 120 AD 2 110 AD 100 90 0 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars)The following table lists several determinants of aggregate demand. Fill in the missing values in the table by selecting the change in each scenario required to increase aggregate demand. Change Required to Increase AD Expected rate of return on investment Incomes in other countries Increase Wealth Taxes Decrease