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.
Seriation is a process which involves the arrangement of a series of objects following a hierarchical order. An example would be organizing objects by size or alphabetical order.
According to psychologist Jean Piaget, this process is acquired by children in their <u>concrete operational stage</u>, and it's important for understanding abstract concepts such as mathematics and time.
In the example in the book, Juke helped a tennis coach improve her players' skills. But before Juke intervened, he and the coach broke each skill into its detailed component parts. This is an example of task analysis.
It is the process of in which a we learn about ordinary users by observing them in action and to understand in detail that how they are performing their tasks to achieve their objectives.
Construct validity is the degree to which a test is done to measure what it claims. Construct validity defines how well the test or experiment actually measures its claims and whether the operational definition of the variable reflect the true theoretical meaning of the concept being illustrated.
The psychologist develops a questionnaire that is designed to study the variable of self-esteem and then conducts different studies to investigate the differences between people who had low scores on sled esteem and the people who had high score on self esteem. The reason for this was to get an accurate method of measuring self esteem. This means the psychologist wants to establish construct validity.
