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Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. also assume that the economy's multiplier is 4.
a. if household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level

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elsiedollawesom
 The aggregate demand curve will initially shift rightward by $15 billion. (2% x 20 billion) 40 billion - (5% x 5 billion) 25 Billion. The aggregate demand curve will eventually shift rightward by $60 billion, because the economy's multiplier is 4, and 4 x 15 is 60 which is positive.

There has been increased consumption with falling price, thus the AD curve has been shifted to the right by $10 billion each price level.

Demand curve can be defined as the curve of the market cost with respect to the purchase by the consumers. The demand curve has been shifted to the right with the fall in the price with increase in consumption.

In the following, since there has been the real state fall by 2%, the price rise can be given as:

With 2% fall rise has been = 2 × $20 billion

2% fall = $40 billion rise.

With 6% fall in the household wealth, fall has been = 6 × $5 billion

With 6% fall = $30 billion fall

The total shift can be given as: $ 40 billion - $30 billion = $10 billion

There has been increased consumption with falling price, thus the AD curve has been shifted to the right by $10 billion each price level.

For more information about the demand curve, refer to the link:

https://brainly.com/question/1915798