Compléter Module 17Version en ligne Aggregate Demand - Fill-in-the-Blank par Zachary Foust 1 downward output price level shock negative When economists talk about a demand , they're referring to a shift of the aggregate demand curve . The aggregate demand curve shows the relationship between the aggregate and the quantity of aggregate demanded by households , firms , the government , and the rest of the world . The aggregate demand curve is sloping , indicating a relationship between the aggregate price level and the quantity of aggregate output demanded . 2 purchasing consumer purchasing power spending level rate holdings demanded spending price power investment power interest purchasing C + I + G + X - M represents the quantity of domestically produced final goods and services during a given period . The aggregate demand curve slopes downward because a rise in the aggregate reduces C , I , and X - M . An increase in the aggregate price level , other things equal , reduces the of money in a bank account . A fall in the aggregate price level increases the of money in a bank account . The wealth effect of a change in the aggregate price level is the change in caused by the altered of assets . In response to an increase in the aggregate price level , the public tries to increase its money , which drives interest rates up . A rise in the reduces investments spending because it makes the cost of borrowing higher . A rise in the aggregate price level depresses , an effect known as the interest rate effect of a change in the aggregate price level . 3 disposable capital spending government private monetary Reserve direct disposable fiscal expectations indirectly fiscal wealth Government monetary Confidence disposable less government shift existing value Federal disposable expect optimistic expectations interest left right pessimistic money expect shifts An increase in aggregate demand means a of the aggregate demand curve to the right . A decrease in aggregate demand means that the aggregate demand curve to the left . A number of factors can shift the aggregate demand curve such as changes in , changes in , the size of physical capital stock , policy , and policy . Consumers base their spending on the income they to have in the future . Firms base their planned investment spending on the sales they to make in the future . Changes in can push consumer spending and planned investment spending up or down . If consumers and firms become more , aggregate spending rises ; if they become more , aggregate spending falls . Surveys of consumer and business sentiment include the Consumer Index and the Michigan Consumer Sentiment Index . When the of household assets rises , the purchasing power they embody also rises , leading to an increase in aggregate spending . Firms engage in planned investment spending to add to their stock of physical . The more physical capital firms have , the they will purchase . can have a powerful influence on aggegate demand . The two main ways the government can influence the aggregate demand curve are through policy and policy . Fiscal policy is the use of either or tax policy to stabilize the economy . The effect of government purchases of final goods and services , G , on the aggregate demand curve is because government purchases are themselves a component of aggregate demand . An increase in government purchases shifts the aggregate demand curve to the and a decrease shifts it to the . Changes in either tax rates or government transfers influence the economy through their effect on disposable income . A lower tax rate means that consumers get to keep more of what they earn , increasing income . An increase in government transfers also increases consumers' income . An increase in income shifts the aggregate demand curve to the right . A higher tax rate or a reduction in transfers reduces the amount of income received by consumers , reducing consumer spending and shifting the aggregate demand curve to the left . The controls monetary policy . Monetary policy is the use of changes in the quantity of or the rate to stabilize the economy . The Federal Reserve is a special institution that is neither exactly part of the nor exactly a institution .
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