1. 1. Aggregate Demand may be measured by
adding:
A. consumption, investment, savings and imports
B. Saving, government spending and business inventories
C. consumption, investment, government spending and net exports
D. Domestic private expenditures and government spending
E. Domestic expenditures and imports
2. Why do you think Congress has yet to adopt a
contractionary fiscal policy?

2. SRAS: Total of all goods firms are willing to
supply the national economy
SRAD: Total of all goods firms are willing to
supply the national economy

3. Tyler Cowen

4. Why slopes downward
Price & Quantity changes

5. Reason #1
Wealth Effect
Fiat currency
$$ = what it can buy
Cheaper price buys
more goods
When prices
change, value of
money changes  Flat screen tvs?
 Healthcare?

6. Reason #2
Investment Effect
Price level falls ,
consumers can/will
save more
Interest rate
decrease causes
more business
investment  Machinery
 Roth IRA accounts

7. Reason #3
Exchange Rate
Effect
Depreciation of $$,
leads to more
expensive foreign
goods
Effect on imports?
Effect on price
level?
 Euro vs. US$
 Peso vs. US$
 Race to devalue

10. Changes to Aggregate Demand
Pages 729-730
Choose:
For each shift of AD curve, explain, give
example of left and right by drawing a
picture, sketch graphs (small poster for
wall)