Aggregate shit

Question 1

components of aggregate demand

Answer 1

Consumption
Investments
Government spending
Net exports

Question 2

ways to calculate price level

Answer 2

Consumer Price Index or GDP deflator

Question 3

real wealth effect (theory)

Answer 3

as things get more expensive, people have less purchasing power, meaning less stuff is being purchased.

This could explain the downward slope of AD

Question 4

interest rate effect (theory)

Answer 4

as things get less expensive, people have more money to put in the bank. This drives down interest rates and incentives investments

this could explain downward slope of AD

Question 5

exchange rate effect

Answer 5

when price lowers domestically, more goods are exported to other countries, causing net-exports to ride

this could explain the downward slope of AD