Factors That Shift Aggregate Demand

These flashcards cover the factors that shift aggregate demand based on changes in expectations, wealth, physical capital, fiscal policy, and monetary policy.

What happens to aggregate demand when consumers and firms become more optimistic?

Aggregate demand increases.

What happens to aggregate demand when the real value of household assets rises?

Aggregate demand increases.

What occurs when the existing stock of physical capital is relatively small?

Aggregate demand increases.

What is the effect of government increasing spending or cutting taxes on aggregate demand?

Aggregate demand increases.

What is the impact of the central bank increasing the quantity of money on aggregate demand?

Aggregate demand increases.

What happens to aggregate demand when consumers and firms become more pessimistic?

Aggregate demand decreases.

What is the effect of the real value of household assets falling on aggregate demand?

Aggregate demand decreases.

When the existing stock of physical capital is relatively large, what happens to aggregate demand?

Aggregate demand decreases.

What is the result of government reducing spending or raising taxes on aggregate demand?

Aggregate demand decreases.

What happens to aggregate demand when the central bank reduces the quantity of money?

Aggregate demand decreases.

What happens when commodity prices fall?

aggregate supply increases

What happens when nominal wages fall?

Aggregate supply increases

What happens when workers become more productive?

Aggregate supply increases

What happens when commodity prices rise?

Aggregate supply decreases

What happens when nominal wages rise

Aggregate supply decreases

What happens when workers become less productive

Aggregate supply decreases