(Please answer all the questions!!! I deeply appericate it) 20. What is on the horizontal axis...

(Please answer all the questions!!! I deeply appericate it)

20. What is on the horizontal axis of the AD/AS diagram? What is on the vertical axis?

21. What is the economic reason why the SRAS curve slopes up?

22. What are the components of the aggregate demand (AD) curve? Chapter 11 | The Aggregate Demand/Aggregate Supply Model 291

23. What are the economic reasons why the AD curve slopes down?

1. What are the main determinants of the level of consumption?

2. What are the main determinants of the level of investment?

3. What are the main determinants of the level of net exports?

Solutions

Expert Solution

Answer : 20) In the AD/AS diagram horizontal axis measure Quantities of output level / Real GNP and vertical axis measure price level.

21) The short run aggregate supply (SRAS) curve is upward sloping. According to law of supply, there is a positive relationship between price and supply. This means if price rise then firms produce more output to earn maximum profit which increase the market supply. On the other hand, if price fall then firms reduce their production level which decrease the market supply. Hence, in short run the aggregate supply curve is upward sloping.

22) The main components of AD curve are consumption, government expenditures, investment and net exports (export - import).

23) The slope of aggregate demand curve is downward sloping. According to the demand law, there is a negative relationship between price and demand. This means if price rise then demand for good decrease. On the other hand if price fall then demand for good increase.

Rahul Sunny answered 1 year ago

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