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  3. 33 the graph below shows the aggregate demand (a

33 The graph below shows the aggregate demand (AD) curve for a hypothetical...

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Accounting

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33
The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point x, the quantity of output demanded is $300 billion, and the price level is 140 . Moving down along the AD curve from point X to point Y, the quantity of output demanded increases to $500 billion, and the price level decreases to 120 . As the price level decreases, the cost of borrowing money will causing the quantity of output demanded to This phenomenon is known as the effect. Additionally, as the price level decreases, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by forelgners (exports) will therefore , and the number of foreign products purchased by domestic consumers and firms (imports) will Net exports will therefore causing the quantity of domestic output demanded to This phenomenon is known as the effect

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