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Chapter 12: Macroeconomics Aggregate Demand (page 239)

What are examples of aggregate demand?

Short Answer

Expert verified

Examples include consumer goods, capital goods, and government spending programs.

Step by step solution

01

Aggregate Demand

When refering to examples of aggregate demand we mainly refer to goods and services households spend their money on capital goods such as machinery that firms invest in, and infrastructure projects that government invests in to promote economic activity.

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Most popular questions from this chapter

What assumptions cause the immediate-short-run aggregate supply curve to be horizontal? Why is the long-run aggregate supply curve vertical? Explain the shape of the short-run aggregate supply curve. Why is the short-run curve relatively flat to the left of the full-employment output and relatively steep to the right?

Suppose that consumer spending initially rises by \(5 billion for every 1 percent rise in household wealth and that investment spending initially rises by \)20 billion for every 1 percentage point fall in the real interest rate. Also, assume that the economy’s multiplier is 4. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? In what direction and by how much will it eventually shift?

Explain: “Unemployment can be caused by a decrease of aggregate demand or a decrease of aggregate supply.” In each case, specify the price-level outcomes.

At the current price level, producers supply \(375 billion of final goods and services while consumers purchase \)355 billion of final goods and services. The price level is:

  1. above equilibrium.
  2. at equilibrium.
  3. below equilibrium.
  4. more information is needed.

True or False. If the price of oil suddenly increases by a large amount, AS will shift left, but the price level will not rise thanks to price inflexibility.
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