Question

Question 12

g) Oil becomes much more expensive.

Instructions: Grab either the AD or AS curve and drag and drop it in a new position to represent the resulting shift in AD or AS.

h) Interest rates fall. Instructions:

Grab either the AD or AS curve and drag and drop it in a new position to represent the resulting shift in AD or AS

AS Price Level(average price) x AD c ♡ > Real Output(quantity per year)

Answer 1

Answer:

g) When oil becmes much moe expensive, agregate demand falls, shifting the AD curve inward, to the left. The new equilibrium point indicates less quantity of oil purchased by consumers and the resulting lower price level.

The graph:

  

AS Price Level(average price) AD1 AD Real Output(quantity per year)

h) When interest rates fall, demand for investment increases as the cost of investment is now lower. So it increases the demand for investment and increases aggregate demand. The AD curve shifts to the right to AD1.

The graph:

AS Price Level(average price) AD1 AD Real Output(quantity per year)