Question

In: Economics

Which effect is likely to occur when oil prices fall?


Which effect is likely to occur when oil prices fall?

 a. Aggregate demand shifts left, the price level falls, and real output falls.

 b. Aggregate demand shifts right, the price level rises, and real output rises. 

 c. Aggregate supply shifts right, the price level falls, and real output rises.

 d. Aggregate supply shifts left, the price level rises, and real output falls


Purchases by which one of the following contributes to the aggregate demand?

 a. households and businesses only

 b. governments and net exports only

 c. households, governments, and net exports only

 d. households, businesses, governments, and net exports

Solutions

Expert Solution

Q1) Fall in the price of oil effect aggregate demand . As price oil fall goods become cheap as its is less expensive to transport . Aggregate demand rises shift rightward , price level fall, and output rise

Correct answer is C

Q2) Aggregate demand = C+ G+ I + net export

So aggregate demand is affected by all types of consumption investment govt spending and export

Correct answer is D

Rahul Sunny answered 2 years ago
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