ECM

  

Please answer the questions in a Word document, maximum 2 pages (include answer only). APA style is preferred.

1) What is quantity theory of money? Please elaborate in details.

2) What are the factors that shift aggregate demand (AD)?

Slide 52 

      

Positive   Shocks (Increase AD) (=   Higher Growth Rate of Spending)

 

A   faster money growth rate

 

Confidence

 

Increased   wealth

 

Lower   taxes

 

Greater   growth of government spending

 

Increased   export growth

 

Decreased   import growth

      

Negative   Shocks (Decrease AD) (=   Lower Growth Rate of  Spending)

 

A   slower money growth rate

 

Fear

 

Reduced   wealth

 

Higher   taxes

 

Lower   growth of government spending

 

Decreased   export growth

 

Increased   import growth