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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 shifts the aggregate demand curve?

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.

Which of the following help to explain why the aggregate demand curve slopes downward?

  1. When the domestic price level rises, our goods and services become more expensive to foreigners.

  2. When government spending rises, the price level falls.

  3. There is an inverse relationship between consumer expectations and personal taxes.

  4. When the price level rises, the real value of financial assets (like stocks, bonds, and savings account balances) declines.

In early 2001 investment spending sharply declined in the United States. In the 2 months following the September 11, 2001 attacks on the United States, consumption also declined. Use AD-AS analysis to show the two impacts on real GDP.

Suppose that the table presented below shows an economy’s relationship between real output and the inputs needed to produce that output:

Input QuantityReal GDP
150.0\(400
112.5300
75.0200

  1. What is productivity in this economy?

  2. What is the per-unit cost of production if the price of each input unit is \)2?

  3. Assume that the input price increases from \(2 to \)3 with no accompanying change in productivity. What is the new per-unit cost of production? In what direction would the $1 increase in input price push the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?

  4. Suppose that the increase in input price does not occur but, instead, that productivity increases by 100 percent. What would be the new per-unit cost of production? What effect would this change in per-unit production cost have on the economy’s aggregate supply curve? What effect would this shift of aggregate supply have on the price level and the level of real output?
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