The first reason for the downward slope of the aggregate demand curve is Pigou's wealth effect. Recall that the nominal value of money is fixed, but the real value is dependent upon the price level. This is because for a given amount of money, a lower price level provides more purchasing power per unit of currency. When the price level falls, consumers are wealthier, a condition which induces more consumer spending. Thus, a drop in the price level induces consumers to spend more, thereby increasing the aggregate demand. The second reason for the downward slope of the aggregate demand curve is Keynes's interest-rate effect. Recall that the quantity of money demanded is dependent upon the price level. That is, a high price level means that it takes a relatively large amount of currency to make purchases. Thus, consumers demand large quantities of currency when the price level is high. When the price level is low, consumers demand a relatively small amount of currency because it takes a relatively small amount of currency to make purchases. Thus, consumers keep larger amounts of currency in the bank. As the amount of currency in banks increases, the supply of loans increases. As the supply of loans increases, the cost of loans--that is, the interest rate--decreases. Thus, a low price level induces consumers to save, which in turn drives down the interest rate. A low interest rate increases the demand for investment as the cost of investment falls with the interest rate. Thus, a drop in the price level decreases the interest rate, which increases the demand for investment and thereby increases aggregate demand. The third reason for the downward slope of the aggregate demand curve is Mundell-Fleming's exchange-rate effect. Recall that as the price level falls the interest rate also tends to fall. When the domestic interest rate is low relative to interest rates available in foreign countries, domestic investors tend to invest in foreign countries where return on investments is higher. As domestic currency flows to foreign countries, the real exchange rate decreases because the international supply of dollars increases. A decrease in the real exchange rate has the effect of increasing net exports because domestic goods and services are relatively cheaper. Finally, an increase in net exports increases aggregate demand, as net exports is a component of aggregate demand. Thus, as the price level drops, interest rates fall, domestic investment in foreign countries increases, the real exchange rate depreciates, net exports increases, and aggregate demand increases.
preventing individual states from having their own currencies.
Explanation:
In the text shown above, Madison discourages allowing individual currencies for each state. He believes that this would weaken trade in the union, in addition to creating strife between the trade established between the states, which would be highly damaging to the country as a whole.
According to Madison, the ideal would be for a single currency to be established throughout the union, this could be done with the ratification of the constitution, which would establish the poribition of individual currencies for each state, but a national currency that should be used by everyone in the territory national.
It was an act of Congress passed July 13, 1787 that created the the
Northwest Territory of the USA and in doing so established the basis of
many of the amendments to the constitution later laid down as part of
the Bill of Rights (including the Abolition of Slavery).
<h3>d. harvest crops but not cut down and sell the timber.</h3>
Explanation:
The leasehold agreement provides a number of exclusive rights to the lessee such as to use or make use of the land for a period of time as specified in the agreement.
These rights, however, may also be stipulated between the owner and the lessee while signing the contract.
The use of land for harvesting crops by the lessee in an outright right that he/she by the virtue of the agreement. However, to cut down trees or for that purpose even clearing large forest areas may not be allowed by the owner.
These issues are normally negotiated with the owner. If the owner agrees, the lessee can cut down trees for sell under certain conditions such as split of profit, compensation, etc.
