The wealth effect, interest-rate effect, and exchange-rate effect all help explain why the aggregate demand curve is downward sl
oping. Phyllis, a fellow student in your AP Macro class, suggests that the substitution effect that you learned about in Unit 1 also explains why aggregate demand curve is downward sloping. She reasons that since it explains why a market demand curve is downward sloping, it must also be valid for aggregate demand. Explain why Phyllis is wrong.
The aggregate demand curve is downward sloping. It implies price levels are falling and the quantity of output will increase as well as the domestic income. The theories that can explain why the aggregate demand curve is downward sloping: the Pigou's wealth effect, the Keynes's interest-rate effect, and the and Mundell-Fleming's exchange-rate effect.
Answer:Talking to your child helps expand vocabulary, develop background knowledge, and inspire a curiosity about the world – all of which help with learning to read.
Drought and leaching leave some parts of Africa without much water, which leads to some portions of the area to turn into a desert, which can prove disastrous for the plants and animals that now find themselves in a completely different habitat.
