Question

For each of the following, what is the expected impact on the AD curve in the...

For each of the following, what is the expected impact on the AD curve in the short run?

a. A fall in business confidence

b. An increase in government debt financing

c. A fall in growth rates abroad

d. An increase in the domestic monetary base

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Answer #1

a) A fall in the business confidence will shift the aggregate demand curve to the left and the new equilibrium will be at lower price and lower quantity output.

b) AN increase in the government debt financing will shift the Ad curve to the right and increase the economic activity in the market.

c) A fall in the growth rates abroad will decrease the exports and shift the AD curve to the right.

d) an increase in the domestic monetary base will reduce the interest rate and increase the demand, it will shift the AD curve to the right.

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