Chapter 9: Aggregate Demand + Supply

Question 1

Factors that shift AD

Answer 1

1) Expectations
2) Fiscal and Monetary Policy
3) World Economy

Question 2

Fiscal Policy

Answer 2

Government attempt to influence the economy by setting and changing taxes, making transfer payments and purchasing goods and services

Recession: Tax decrease, Government Spending increase
Bubble: Tax increase, Government Spending decrease –> what should happen: government spending increase

Question 3

Monetary Policy

Answer 3

Consists of changes in the interest rate and the quantity of money in the economy: i, Qm

Recession: i decreases, Qm increases
Bubble: i increases, Qm decreases

Question 4

World Economy

Answer 4

GDP = C + I + G + (EX-IM)

Question 5

Aggregate Demanded

Answer 5

The relationship between the quantity of real GDP demanded and the price level