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2. Determinants of aggregate demand The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1 to AD2, causing the quantity of output demanded to fall at all price levels. For example, at a price level of 140, output is now $200 billion, where previously it was $300 billion.
170 160 150 140 +-+ PRICE LEVEL 130 120 110 AD 100 AD 90 0 100 700 800 200 300 400 500 600 OUTPUT (Billions of dollars) The following table lists several determinants of aggregate demand.
Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Change Needed to Decrease AD Wealth Taxes Increase Interest rates The value of the domestic currency relative to the foreign currency Decrease Grade It Now Save & Continue