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Explain how each of the following events would affect the aggregate demand curve.a.Lower interest ratesb.A decrease in net exportsc.A decrease in the price leveld.Slower income growth in other countriese.A decrease in imports

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6 votes

Answer:

a. Lower interest rates - lower interest rates would shift the demand curve to the right, because they would make investment cheaper, raising investment and the overall demand in the economy.

b. A decrease in net exports - this would shift the aggregate demand curve to the left, because less exports means less income for firms and households that engage in exporting activities, and this in turn results in less investment and spending.

d.Slower income growth in other countries - if the country has significant economic relations with said countries, then, the aggregate demand curve will shift to the left, because the people who have any sort of economic relation with people from the countries where income growth is slowing, will be affected.

A decrease in imports - a decrease in imports could shift the aggregate demand curve to the left if the demand fo those goods is not met by domestic supply.

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User Phiver
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