1. All else equal aggregate demand is most likely to decrease in response to a decrease in a. interest rates b. fedral tax revenues c. the value of the dollar d. expected corporate profits 2. Assumming the economy is operating at full employment, what is the most likely long run effect of an increase in govenment spending on the price level and real GDP? Price level Real GDP a. increase increase b. increase no change c. no change increase d. no change no change
  1. Aggregate demand slopes downward and is a function of the following exogenous and endogenous variables: AD= GDP = Y = C+I +G + (X-M) Now, looking at the question, if AD decrease, it will shift downward (in the graph Price level- Real GDP). A. interest rates (True as as decrease in interest rates will decrease price and hence the AD will shift downward). 2. Answer A

Sorry strangedays both answers are not correct. Give it another short

:slight_smile: This economics it is killing me…to many things to remember… skfadkddsdsfd… Ommm Ommmm

what about a D and B.

yes! you got it this time congrats!

I think you got it now

Here there is the explanation: 1)Condering the equation: AD= GDP = Y = C+I +G + (X-M) if corporate profit decrease, I (investment) decrease and hence AD decrease. 2) Because the economic is at full employment and hence at it s natural rate of employment, “in the long run” (to note) the GDP will be unchanged and only result in increasing inflation (hence price).