Aggregate demand and aggregate supply

2007-05-03 9:14 pm
Indicate how each of the following affects aggregate demand and aggregate supply. Briefly explain why.

a. An increase in interest rates
b. Afall in the value of the Australian dollar

回答 (1)

2007-05-07 9:25 pm
✔ 最佳答案
a/ when interest rates increase, less people borrow money because they have to pay more interest now. So they pay less on consuming so AD decreases. AS oould decrease as well because cost of production for suppliers increase as well. Their cost of borrowing increase is the reason.

b/ When Australia dollar falls, their tourists that visit our place would consume less because goods become more expensive for them than before. This decreases demand of our goods so AD decreases. AS would increase because when australia dollar falls, their material becomes cheaper so we can buy more materials from them with the same amount of payments. Cost of production decreases..... so supply increases.

P.S. AD=C+I+G+(X-M)

Analysis these AD and AS these way and they are quite straight forward.


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