The aggregate demand and aggregate supply model is a useful simplification of the macroeconomy used to explain short-run fluctuations in economic activity around its long-run trend.

The horizontal axis of a diagram of the aggregate demand and aggregate supply curves measures which of the following?

1. The price of a particular representative good produced in the economy

2. The amount of a particular representative good produced in the economy

3. An economy’s real GDP

4. An economy’s price level

Which of the following are reasons that the aggregate demand curve slopes downward? Check all that apply.

1. As the price level rises, imports become relatively cheaper than domestically produced goods.

2. As the price level rises, households’ real wealth decreases.

3. As the price level rises, households’ real income increases.

QUESTION 1:

The horizontal axis measures an economy's real GDP- 3

QUESTION 2:

As price level rises, imports become relatively cheaper than domestically produced goods- 1

Explanation:

QUESTION 1

The horizontal axis of the aggregate demand and aggregate supply measures an economy's real GDP. The GDP is the sum of all the final goods and services produced in the economy while the vertical axis of an aggregate supply and aggregate demand diagram measures the price index level.

QUESTION 2

When domestic interest rate is low compared to foreign interest rates, domestic investors invest in foreign countries where return on investments is higher. Increased outflow of currency to foreign countries, causes a decrease in real exchange rate. This decrease, increases net exports. This then, increases aggregate demand. As the price level drops, interest rates fall, investment in foreign countries becomes increased, real exchange rate falls, net exports increases and the aggregate demand then increases.

steering wheels are always situated on the left side of the car.

always drive on the right side of the road.

white lines separate lanes of traffic traveling the same direction.

hashed or broken lines means you may change lanes when it is safe.

solid white lines mean stay in your lane.

yellow lines separate traffic moving in opposing directions.

hashed or broken yellow lines mean you can carefully pass, paying attention to oncoming traffic.

never cross a solid yellow line (or double yellow line).

when turning left at an intersection, pass in front of any cars that are turning left from the opposing direction (do not try to pass behind them).

use the left lane to pass other cars traveling your direction.

do not pass in the right lane unless absolutely necessary.

if you are driving in the far left hand lane and someone would like to pass you, move over to the right lane when it is safe to do so and allow them to pass.

you must always yield to pedestrians.

come to a complete stop whenever you see pedestrians trying to cross the street.

never pass a school bus if it has flashing red lights. wait until the lights have stopped.

be aware of bicyclists. often they share the road with cars and are supposed to also follow general traffic laws.

be particularly careful about driving in cities with bike lanes -- always check before turning that a bike is not coming.

it is mandatory to pull over or stop at an intersection to allow an emergency vehicle to pass you if you see one traveling with lights flashing and/or a siren running.

do not overuse your car horn. horns are used almost exclusively for emergency situations or for when you feel unsafe.

explanation: