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¨helps to ascertain the true status of macroeconomic value within a country because it includes :
¨Variables associated with the performance of an economy as a whole.
¨more value for finished goods which is a clear indicator of a healthy economy.
¨Aggregate supply also helps to pinpoint net increases or decreases from one period to the next
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Fiscal and monetary policies are used to shift the aggregate supply curve or the aggregate demand curve?
Aggregate demand curve.
Why the aggregate supply curve has its particular shape?
The aggregate supply curve is positively sloped because at a higher price level, producers are more willing to supply more real output.
Ceteris paribus the price level will fall when A The aggregate supply curve shifts to the left B The aggregate demand curve shifts to the left C The aggregate demand curve shifts to the right?
b
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
In which range of the aggregate supply curve is the price level constant?
Horizontal.
Fiscal and monetary policies are used to shift the aggregate supply curve or the aggregate demand curve?
Aggregate demand curve.
Aggregate demand and Aggregate supply curve?
The aggregate demand curve show what consumers are willing to buy at a given price level, whereas the aggregate supply curve shows what producers are willing to produce at a given price level.
Why the aggregate supply curve has its particular shape?
The aggregate supply curve is positively sloped because at a higher price level, producers are more willing to supply more real output.
Ceteris paribus the price level will fall when A The aggregate supply curve shifts to the left B The aggregate demand curve shifts to the left C The aggregate demand curve shifts to the right?
b
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
In which range of the aggregate supply curve is the price level constant?
Horizontal.
What is aggregate shock?
In economics, the supply curve in the aggregate supply and demand model shifts drastically to the left due to an inadequacy of resources or because the demand overpowers the supply.
What factors cause a shift to the right in the aggregate supply curve?
ask your mom!
What happens to the income multiplier if the aggregate supply curve is vertical?
the multiplier is zero.
Aggregate supply curve is perfectly inelastic an increase in agregate demand will lead to?
Inflation.
The quantity of output supplied at different price levels is represented by the?
aggregate supply curve
Why does the slope of the aggregate supply curve change from the short run to the long run?
Aggregate supply is a measure of the total goods and services produced by an economy at various price levels, either in the short run or in the long run. Short run aggregate supply curve is assumed to be upward sloping. Higher prices for goods and services means more profit for suppliers, so they will produce more goods and services. Long run aggregate supply curve is assumed to be vertical. Short run aggregate supply curve is curved because prices can change. A change in the price level means a movement along the short run aggregate supply curve. An increase in costs results in a fall in aggregate supply because the output is less at every price level. A decrease in costs results in a rise in aggregate supply because the output is more at every price level. In the long run, the aggregate supply is assumed to be independent of price level. In other words, the economy is at the maximum output possible. Full employment level has been reached and real GDP has reached its maximum potential, so the long run aggregate supply curve must be drawn as vertical. Increases in the quality and number of factors of production will cause the productivity of the suppliers to increase, and the long run aggregate supply will shift right.
