Discuss how the economy returns to equilibrium in response to changes in aggregate demand (AD) and aggregate supply (AS) in both the short run and long run

Q: Why unemployment results when Aggregate Demand is lesser than Aggregate Supply in the economy?

A: Aggregate demand refers to the total demand for the finished goods and services in an economy—the…

Q: If the economy experiences inflation and economic growth, this means that aggregate demand grows by…

A: When there is a positive/rightward shift in the AD(from AD0 to AD1), which is larger than the shift…

Q: Consider the exhibit below for the following questions. If the economy is in long-run equilibrium,…

A: An adverse shock of supply-side is an event which tends to cause an unexpected increase in costs or…

Q: Explain how the aggregate demand curve is derived.

A: The aggregate demand shows the relationship between price level and quantity demanded. That is,…

Q: The following graph shows the short-run aggregate supply curve (AS), the aggregate demand curve…

A: If the bout of severe weather increases the agriculture cost, cost of transporting and cost of…

Q: Discuss one reason for the downward sloping aggregate demand curve.

A: Demand curve in simple words we can say that it depicts the relationship between the price of the…

Q: What happens to the output and price level if aggregate demand and aggregate supply curves shift in…

A: The aggregate demand and aggregate supply curve is a model that shows what decides total supply or…

Q: What effects would each of the following have on aggregate demand or aggregate supply, other things…

A: Aggregate supply would increase,equilibrium price level and real output would increase.

Q: Which of the following would cause an increase in long-run aggregate supply? The price level…

A: AS(Aggregate supply) is the curve which shows the relationship between P(price level) and…

Q: Explain  the factors that cause the Aggregate Demand curve to be downward sloping left to right.

A: The meaning of downward sloping demand curve is that when the price falls the aggregate demand…

Q: Using the concepts of aggregate demand and aggregate supply, explain how the economy reaches an…

A: The economy is in equilibrium position at the point where the aggregate demand and aggregate supply…

Q: Use the dynamic model of aggregate demand and supply to illustrate a situation where the economy is…

A: The AD-As model implies inflation may arise due to shifting in the Aggregate demand curve on the…

Q: Which of the following does not shift the aggregate supply curve? Changes to technology Increases in…

A: Aggregate demand and aggregate supply are the two most important variables in macroeconomy.…

Q: Explain with example how a reduction in taxes without a reduction in government spending may have no…

A: The economies around the world tend to focus on their growth, stability in the financial, and…

Q: Explain in detail why the aggregate short-run aggregate supply curve is upward sloping?

A: According to classical macroeconomic theory, the aggregate supply curve is perfectly vertical in the…

Q: Which of the following would shift the aggregate demand curve to the left?

A: Change in consumption, investment, government expenditure and net export will cause shifts in…

Q: Illustrate each of the following situations with a graph showing aggregate supply and aggregate…

A: Case 1: Increase in government spending while money supply held by the Fed is constant. The constant…

Q: Which of the following policies does not shift the aggregate supply curve to the right?

A: (1) The aggregate supply (AS) curve depicts the total supply of goods and services at each price…

Q: Explain why the Aggregate Demand curve is downward sloping

A: Aggregate demand curve is demand for finished products (goods and services) in an economy at a…

Q: Following an increase in consumer confidence, the US economy is experiencing a significant increase…

A: The AD-AS model is the proposition of the Keynesian theory proposition which attempts to explain the…

Q: Give three reasons why the aggregate demand curve slopes downward.

A: Answer - Reasons for AD curve to be sloping downward:- 1. Wealth effect:- According to this money…

Q: Differentiate long-run aggregate supply from short-run aggregate supply.

A: The aggregate supply refers to the total amount of all the goods, and services supplied by all the…

Q: the factors that can increase short-run aggregate supply?

A: Aggregate supply- It is the total supply of goods and services by an economy.Short-run aggregate…

Q: Along the long-run aggregate supply curve, the price level with decreases in aggregate demand. A)…

A: While aggregate demand calculates the total demand for all final goods and services produced…

Q: What relationship does the short-run aggregate supply curve represent?

A:

Q: What are the major factors that determine investment, and what impact does each have on aggregate…

A: Investment refers to the economic activity under which households and firms make an agreement or…

Q: aggregate supply

A: Out of the two, short term aggregate supply is more realistic and reflects the actual scenario of…

Q: If a decrease in the price level does increase the real value of wealth, this is a reason for the…

A: Aggregate demand curve is downward sloping because if price level decreases, there is increase in…

Q: Graphically illustrate the long-run aggregate supply curve. Explain

A: In the long run, the aggregate supply curve is assumed to be vertical that is it does not change…

Q: If the economy’s labor force is increasing and also becoming more productive, what will happen to…

A: The whole supply of goods and services produced within an economy at a certain overall price in a…

Q: What factors shift the short-run aggregate supply curve?Do any of these factors shift the long-run…

A: Aggregate supply refers to the total supply of services and goods that is planned to be supplied in…

Q: Draw the aggregate demand and aggregate supply curves and explain the following macroeconomics…

A: The economies around the globe have various entities, which operates with the motive of maximizing…

Q: Which of the following causes the short-run aggregate demand curve to slope downwards? a) Changes…

A: The demand curve slope downwards when there is a fall in the price level, there is a movement along…