Problem 13.11Need Table, Graph and a comprehensive answer that is a minimum of 500 words that :1....

Question

Problem 13.11Need Table, Graph and a comprehensive answer that is a minimum of 500 words that :1. Demonstrate understanding of chapter consepts2. Explains fully the relavent concepts3. Applies the chapter concepts accurately to the question4. Includes facts(evidence) that support point of view

David · Accepted Answer

Answer: 
IS curve is the locus of different combination of interest rate and output for which goods market 
is in equilibrium. Good market would be equilibrium when aggregate demand equals aggregate 
supply.  
Aggregate demand (AD) is sum total of final goods and services demanded in the economy at a 
given price level and time. And it is calculation by summing Investment expenditure (I), 
government expenditure (G), consumption expenditure (C) and net export (X-M) i.e. 
AD = C+ I+G+X-M ………………… (1) 
It is negatively related to price level. An increase in the price level lowers the real money supply, 
inducing interest rate to rise and hence causes aggregate demand to fall in the form of decline in 
investment expenditure whereas a decline in price level increases the real money supply in the 
economy, inducing lower interest rate and therefore higher spending in the form of investment 
spending. Hence we find aggregate demand curve is negatively sloped.

Problem 13.11Need Table, Graph and a comprehensive answer that is a minimum of 500 words that :1. Demonstrate understanding of chapter consepts2. Explains fully the relavent concepts3. Applies the...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment