Question

In: Economics

When an economy is experiencing higher real interest rates, wewould expect aggregate demand to ______________...

When an economy is experiencing higher real interest rates, we would expect aggregate demand to ______________ and unemployment to _____________.

shift to the left; rise

shift to the left, fall

shift to the right; rise

not move; not change

If investment spending increases, then according to the Keynesian model:

the aggregate demand shifts right.

the short run aggregate supply curve shifts right.

the aggregate demand curve shifts left.

the short run aggregate demand curve shifts left.

Expert Solution

1.

Since investment is the component of aggregate demand, so when the investment spending increase, the aggregate demand curve shift to the right.

Hence option first is the correct answer .

Option first is: aggregate demand shift to the right

2.

When economy experiencing higher real interested, it is expensive to invest more, so investment decreases, hence the production decrease, therefore unemployment rise.

Hence aggregate demand shift to the left, and unemployment rises.

Hence option first is the correct answer

Rahul Sunny answered 2 years ago

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