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    ahh yea thanks! and ok - last question : how does a fall in the exchange rate affect aggregate demand?
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    (Original post by TheWolf)
    rigt another question: - for aggregate demand curve - according to my notes

    1.the slope of the curve is because as price level rises, real wealth falls and therefore people spend less as they have less disposable income. Therefore consumer expenditure falls. (what is this to do with the slope?)


    2. As price level rises, domestic products such as ours become less competitive both at home and abroad therefore spending on uk good falls. Exports down, imports up X-M worse


    can someone explain how these show the slope of the curve?
    1. At a high price level consumers are less able and willing to spend money as the goods costs a higher proportion of their wealth and therefore there is low demand. At a low price level the cost of goods cost a lower proportion of a consumers wealth and therefore they demand more or the product as they are more willing and able. If you connect these two points up you get a downward sloping curve.

    2. At higher prices the demand for exports is going to be low because foreign consumers can get it cheaper elsewhere. The demand for imports will be higher because domestic consumer can get it cheaper abroad ie X-M is low even negative maybe so AD is low. At low prices demand for exports will be higher because they are relatively cheaper but the demand for imports will be low because foreign products are relatively more expensive .:. X-M will be higher and AD will be higher. Connect these two points up and you get a downward slope
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    (Original post by TheWolf)
    ahh yea thanks! and ok - last question : how does a fall in the exchange rate affect aggregate demand?
    ok well if ur exchange rate depreciates then ermm....
    not sure actually, but when the exchange rate falls then ur goods become cheaper abroad and their goods become more expensive in yourcountry
    how that affects aggregate demand im not sure.... im guessing it increases but i dont really know sorry!
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    (Original post by TheWolf)
    ahh yea thanks! and ok - last question : how does a fall in the exchange rate affect aggregate demand?
    A fall in the exchange rate means imports are relatively more expensive so consumers tend to buy more domestic goods since they are cheaper in real terms. Exports will rise since they are relatively cheaper --> AD will increase
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    (Original post by Economist)
    A fall in the exchange rate means imports are relatively more expensive so consumers tend to buy more domestic goods since they are cheaper in real terms. Exports will rise since they are relatively cheaper --> AD will increase
    thought so!
    thanx for the input
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    what does it mean by 'sticky' in a downward direction? this i sto do with aggregats supply, keynesian's view
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    (Original post by TheWolf)
    what does it mean by 'sticky' in a downward direction? this i sto do with aggregats supply, keynesian's view
    ive heard that expression before
    from what i kno i think it mens it points in a downward direction. just a phrase they use i think
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    Quote:
    Originally Posted by TheWolf
    what does it mean by 'sticky' in a downward direction? this i sto do with aggregats supply, keynesian's view

    ive heard that expression before
    from what i kno i think it mens it points in a downward direction. just a phrase they use i think
    Keynes referred to wages as being "sticky downwards" as they rarely fall. This maybe up to a number of factors including trade unions and this is a possible agrument against the classical macroeconomic model. In reference to AS, it rarely falls in real terms.

    Another possible cause of market failure is imperfect or asymmetrical information within the marketplace.

    I am doing AS edexcel econ on the 14th. Got a 15 mark question:

    To what extent are fiscal policies better then monetary policies when dealing with macroeconomic issues.
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    What is the retail price index for an individual who spends 30% of his income on food, 30% on clothes, 20% on travel and 20% on bills such as water gas electricity etc. Given that the price increases in the respective sectors are the following- food increases by 6%, clothes by 4%, travel unchanged and bills by 5%

    a6%
    b4%
    c5%
    d10%

    which is the right answer?
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    (Original post by TheWolf)
    What is the retail price index for an individual who spends 30% of his income on food, 30% on clothes, 20% on travel and 20% on bills such as water gas electricity etc. Given that the price increases in the respective sectors are the following- food increases by 6%, clothes by 4%, travel unchanged and bills by 5%

    a6%
    b4%
    c5%
    d10%

    which is the right answer?
    anyone?
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    I'd say b, by using weighted averages. (6*30+4*30+5*20)/100
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    (Original post by mik1a)
    I'd say b, by using weighted averages. (6*30+4*30+5*20)/100
    Yea I think it's B
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    (Original post by TheWolf)
    What is the retail price index for an individual who spends 30% of his income on food, 30% on clothes, 20% on travel and 20% on bills such as water gas electricity etc. Given that the price increases in the respective sectors are the following- food increases by 6%, clothes by 4%, travel unchanged and bills by 5%

    a6%
    b4%
    c5%
    d10%

    which is the right answer?
    sorry i wasnt online..
    and yeah its B...
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    right if you are a classicist - to change economic growth in the long term - you would use supply side policies right because demand side policies would do nothing but cause inflation>
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    (Original post by TheWolf)
    right if you are a classicist - to change economic growth in the long term - you would use supply side policies right because demand side policies would do nothing but cause inflation>
    Yes, as Fiscal and Monetarist policies are concerned with aggregate demand - supply side policies increase productivity, which increases the long run AS curve.
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    (Original post by TheWolf)
    right if you are a classicist - to change economic growth in the long term - you would use supply side policies right because demand side policies would do nothing but cause inflation>
    yes
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    does anyone know how a fall in interest rates will raise the price of government bonds? :confused:
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    (Original post by TheWolf)
    does anyone know how a fall in interest rates will raise the price of government bonds? :confused:
    Government bonds offer fixed interest rates, so when interest rates fall, and saving in the flexible market becomes undesirable, demand for government bonds will increase, meaning prices will increase.
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    what is the difference between real and money national income?
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    (Original post by TheWolf)
    what is the difference between real and money national income?
    u mean real or nominal national income?
 
 
 
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