Question

Match the cause for the negatively sloped aggregate demand curve with the correct term.

Answer 1

Answer:

1. C

2. B

3. D

Explanation:

Gross Domestic Products (GDP) is a measure of the total market value of all finished goods and services made within a country during a specific period.

Simply stated, GDP is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country.

Basically, the four (4) major expenditure categories of GDP are consumption (C), investment (I), government purchases (G), and net exports (N).

The various factors that have an effect on the GDP of a country's economy are;

1. The Interest Rate Effect: As prices rise, the cost for businesses to finance new equipment increases, causing a drop in quantity demanded of real GDP.

2. The Wealth Effect: The purchasing power of money held in savings accounts falls as prices rise.

3. The Export Effect: As prices rise in the United States, foreigners purchase fewer U.S. goods.