Chapter 14 summary and notes

, Interest rates annual rate which interest is paid
=
(percentage of borrowed amount
AGGREGATE DEMAND (AD)
↓
Schedule/curve >
-
downward
sloping
- shows total quantity of goods + services demanded (purchased) & different price levels
or

- shows real output (real GDP) buyers desire to purchase at each price level
amounts
- Relationship with price level (measured by GDP price index) /amount real app demanded
=
inverse/negative (when price levels
rise-quantity real GDP demanded decreases




Balances
effect :
Tendency for increases in price leve to lower real value (or
purchasing power) of financial assets with fixed money value +
reduce total spending 3 real output 3 conversely for decreases
, ,



in price level.



Enterest
rate effect
Tendency : for increases in price level to increase the demand for
money , raise interest
rates i as a result , reduce total
,




spending 3 real output in the economy (i the reverse for
,



price-level decreases)

Foreign
purchases effect : Inverse relationship between net exports of economy price
level relative to foregin price levels.


Determinants of aggregate demand-factors that if change shift
, demand curve

* CHANGE IN CONSUMER SPENDING :

Consumer wealth
·




Consumer
·

expectations