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M UNIVERSITI
TEKNOLOGI
MARA
UNIVERSTI TEKNOLOGI MARA

ASSIGNMENT 1- MACROECONOMICS (ECOSS7)

PREPARED FOR:

MADAM FATIMAH BINTI SETAPA

STUDENT ID NAME CLASS

2021155903 NUR HADHIRAH BINTI MOHD CS2423D

JATIKUSMA

2021119075 NUR SABRINA BINTI NORAZMIR CS2423D

SUBMISSION DUE ON :

19" NOVEMBER 2021

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•1 Ba sed o n ihe.. do SSicQ I theor!:S., t h e o n l.!1 fQ c to r t hot-

s hi f.f s <l!Jjre.3 o t e.. d t mcrnd ( A D) is :=1 e ha n3 t- i n m one,j Sup Pl_j ·
M o ne~ JS n eutra l b e<<1 l1Se c ha n9es ,n mo n e~ s1.1 ppl.!;1 ha ve,
no effed- ori r"e al variabl es. - Th o t ls., mon e·fQ~ ~ ch;, fS
h a ve. n o rbl e, "R> p!CI~ in ~ e -fer m in in.9 -fh c. le ve l o f outp 1.1 t-
ond e m p lo~l1'len t .

I Price. leve l

d-_--~~ AD '

In co m e,
Y,,__
Ir-ig ht-
-1-tiat-- A O Increa ses ., s o A D cu r v e Shrfts to ff\e.
JI\ SS"!m e
Pri ce. le vel incr t <'! Se.S h> P ', b u !- th e. output- r e m o i n.s
-f h e. some q f Yr e . Th1.1s., a c ho n3e ,n A D o nl~ q~f ects
p ri ce. leve l t:i t o •~nslc.n t le.ve l of o ul-p1.1f-- A~ ;t,'o n a llj.,
tt,. e i n ,hal e~ •l i b riu m i s o f- P' .qn d V Fe . Th is is Wh t r e
+he A D' c:\ r'\d ~ .99 r es<=l -t·e. Sl.lpp1~ ;..,+e rse c:t s vv ,H, eo c. h o fhe .,
 Q u estion 3

lhe "V''libri1.1m inter-es+ rate. rs det•u ·m1ned b~ 1h e. amot1 n f-

of. sav,n.jS alld investme nt in a n e,onom~ . It is dete rmin ed
bj 'f +, e. ,nto..-sech' on
of -#he <femqnd -fu r c:r nd Su p plj o .f
. /o ono b1e. fu nds whczn q;.i a nli~ o~ L F dema nd ed (irw estme n+-)
is " 'V'<=i l "h. "t),lanfi~ of LF Sl.lp p li ~d ( S'a v in.9 s ) -

C.las sica/ economrs +.s 4Ssume tt,o+ ·Hie LF ma rk e-t- i.S

_r etlwaj s in ecv-iilibrium b f'<a use fh e. ini-eres+ re. ~ JS
perFc>d/j f/exl b fe, and Cl 'til.lSt-5 So -fttqf- vanH~ o f S'CI Vi".j
alw.:ij-5 eq,uo/ 3 ~anti~ of lnve.sirrtenf- ·

A l>h if+ in Hie 5'lpp~ of or' ({e~nd .fu r LF wilt <ouse.

m arke t fr>rces +o d,i11e~ -1he rat e Of i~res+ htic lc. i n+o
eo/'il ,briurn~ t a diffe re nt level - Wfth e~ss d em__f!_nd f-o,...
funds., +ti e interf'.S ,-. B! +e. ,nr reqse:.s . W ith e-.:cess S li pp!~ of.
functs t l:!_e. inffrest- r a +e de tr<"tiS eS This -ffe 1<ibilif::J fri
ft, e in+eres t rate. _ .9uaranttf'S tho +- e xo3 e noUS. ch a nges. _
ih +he pMhi._11/a,,. ('o n'l ponents ol- AO do no_! ct{/:ect +he. le"el
uf. AD .
 7he rc.J.e. of 1r1 terPS f- q cf5 GIS q S-fabilf~('_ ,...- oh 1h e,
cklsSiea t mode l - The {/vl(ib,1,~ 0n -lh e port- of ihe intEr c;,st-
r ate. kee pS AD and lhe economj stob/e
, Th e re are two eqses -lhat c.:in be, SE'E.''1. F,rs-1/~J S1n c.e
lh e inter es+ r<11 e ~1/S lf ftie,-e, l.5 an autonomotJS
decl, ne in inves-lme n t- c:(~r,d., -lhe Su m of private Sectov
de mands ( C. + I) r e mc:iinS unchan9"dj So .AD re mair'IS tne,

I.Sc.me- S"<ondl!fj Sin ui.. the ,nteres1 rnte ri.S e.s ""he n C1
rise.s., 1h e. d<>d ,ne, ,n ,nvl"S fme n t- anrl <onsumf11on j 1.1S t-
, batanc.es 1h t- increQSe, in s ovemmt> nT Spe nd,nj so AO r-,.
re matnS i he So me.-