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Author Question: Explain why the demand for domestic goods curve (ZZ) has a different shape than the domestic demand ... (Read 85 times)

littleanan

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on: Jun 30, 2018
Explain why the demand for domestic goods curve (ZZ) has a different shape than the domestic demand curve (DD).
 
  What will be an ideal response?

Question 2

If a country experiences persistently low inflation, which of the following tends NOT to occur?
 
  A) wage indexation will become less important
  B) nominal wages will be set for shorter periods of time
  C) the markup over labor costs will decrease
  D) all of the above


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steff9894

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Reply #1 on: Jun 30, 2018
Answer to Question 1

The marginal propensity to import explains this. As Y increases, C and I will increase causing an increase in DD. Some of this increase in demand is for foreign goods. This must be subtracted from DD to obtain ZZ. So, a given increase in Y will have a larger effect on DD than it will on ZZ.

Answer to Question 2

A


littleanan

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Reply 2 on: Jun 30, 2018
Thanks for the timely response, appreciate it

Liamb2179

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Reply 3 on: Yesterday
:D TYSM

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