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Lesson 13: Aggregate Demand | Unit 3: The Curve Page: 15 of 22

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  • The basic setup, shape, and position of the aggregate demand curve on a graph. The AD curve shows the negative relationship between the price level and real GDP.
  • What causes the negative slope of the AD curve--namely: 1) the real-balance effect, 2) the interest-rate effect, and 3) the net-export effect.
  • Why the real-balance effect means that a higher (or lower) price level reduces (or increases) the purchasing power of money, resulting in less (or more) real production purchased.
  • Why the interest-rate effect means that a higher (or lower) price level leads to higher (or lower) interest rates and thus a higher (or lower) cost of borrowing which decreases (or increases) consumption and investment expenditures on real production.
  • Why the net-export effect means that a higher (or lower) price level decreases (or increases) exports and increases (or decreases) imports thus decreasing (or increasing) net export expenditures on real production.

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INJECTIONS LINE

A graphical representation of the relation between the level of aggregate production and one or more injections. The three injections (non-consumption expenditures on aggregate production) are investment expenditures, government purchases and exports. The injections line sequentially adds, or layers, each of these three expenditures depending on the number of sectors used in the analysis (two, three, or four). The slope of the injections line depends on which if any of the expenditures are induced by aggregate production. The injections line is combined with the leakages line (containing saving, taxes, and imports) in the Keynesian injections-leakages model.

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BROWN PRAGMATOX
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Today, you are likely to spend a great deal of time wandering around the shopping mall hoping to buy either a travel case for you toothbrush or a looseleaf notebook binder. Be on the lookout for crowded shopping malls.
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The New York Stock Exchange was established by a group of investors in New York City in 1817 under a buttonwood tree at the end of a little road named Wall Street.
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