1. Real-Balances Effect

question 237

Multiple Choice

1. Real-Balances Effect
2. Household Expectations
3. Interest-Rate Effect
4. Personal Income Tax Rates
5. Profit Expectations
6. National Incomes Abroad
7. Government Spending
8. Foreign Purchases Effect
9. Exchange Rates
10. Degree of Excess Capacity
Answer the question based on the accompanying list of factors that are related to the aggregate
demand curve. Which of the factors best explain the downward slope of aggregate demand curve?

• A) 2, 4, and 6
• B) 7, 9, and 10
• C) 1, 3, and 8
• D) 4, 6, and 7

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Definitions:

Straight-Line Method

A method of calculating depreciation of an asset which spreads the cost evenly across the useful life of the asset.

Prior Period Adjustment

Adjustments made to the financial statements to correct errors or inaccuracies from previous periods.

Residual Value

The estimated salvage value an asset will have at the end of its useful life.

Manufacturing Equipment

Machinery and tools that are used in the process of producing goods in a manufacturing facility.