Question: Determinants of aggregate demand The following graph shows a decrease in aggregate demand in a hypothetical country. Specifically, aggregate demand shifts to the left from
Determinants of aggregate demand
The following graph shows a decrease in aggregate demand in a hypothetical country. Specifically, aggregate demand shifts to the left from AD
1 to AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion.
The following table lists several determinants of aggregate demand. Complete the table by indicating the change needed in each determinant to decreaseaggregate demand.
Determinant Change Needed to Decrease Aggregate Demand
Consumer Confidence ________________(Increase/Decrease)
Government Purchases ________________(Increase/Decrease)
Interest RatesI ________________(Increase/Decrease)
Incomes in Other Countries _________________ (Increase/Decrease)
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