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As we have learnt in the course aggregate demand is equal to C+I+G+(EX-IM) where the only difference with RGDP is that in the above equation I does not include accumulated inventories. For each of the events below, specify which component of the AD curve is affected and what happens to the AD curve.

A) An increase in RGDP in Europe and Japan.

B) A decline in households’ expectations of their future income.

C) The government fears an incoming war and start preparing for it by increasing military spending.

D) Interest rates on mortgages go down and this spurs an increase in purchases of newly built home.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91228477

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