Why does the aggregate demand (AD) curve slope downward? What ...

[Lobcity]

Why does the aggregate demand (AD) curve slope downward? What could cause the AD curve to shift to the right? What impact would a rightward shift of the AD curve have on the economy?

Question 2

When the Fed increases the money supply, interest rates:
 a. rise.
  b. fall.
  c. are unaffected.
  d. rise and then fall.
  e. fall and then rise.

[kaillie]

Answer to Question 1

The AD curve slopes downward because of the real balances (wealth) effect, the interest-rate effect and the net exports effect. Anything that increases total spending in the national economy would shift the aggregate demand curve to the right and increase real GDP and the price level (creating demand-pull inflation).

Answer to Question 2

b