Give and explain an example for each of the "Effects" that determine the slope of the...

Give and explain an example for each of the "Effects" that determine the slope of the Aggregate Demand curve.

Expert Solution

The effects that determine the slope of Aggregate demand curve are:

1. Consumption- the more the consumption by the households the more is the demand created and hence the demand curve moves upward.

2. Investment- Again the higher the investment more will be the production as people would produce more and demand more labour which will increase income and hence more demend.

3. Government purchases - A big share of the market is controlled by the Government which stops the sale of products at lower prices and assures for the purchase of the same at acceptable prices.

4. Net exports - The more the exports the demqnd curve would shift towards the right depicting increased in salary.

Rahul Sunny answered 2 years ago

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