Question

 Question 6

 An increase in aggregate demand (AD) can cause

•  an increase in cyclical unemployment.

•  a recession in the economy.

•   an expansion in the economy.

 

Question 9

 Which of the following would cause a negative demand shock (shift to the left) in aggregate demand?

•  decreased availability of business capital

•  increased government spending

•  production costs falling

 Question 10

For aggregate demand and aggregate supply to be an economic model, the equilibrium aggregate price level and equilibrium aggregate real GDP should 

•  only consider long run curves.

•  be considered in individual markets.

•  intersect.

Answer 1

Answer

6)

Increase in AD will shift AD to the right and Supply will remain same. Hence both equilibrium Output and Equilibrium price will increase and hence there will be more Output and hence there will be expansion in the economy.

Hence the correct answer is (c) an expansion in the economy.

9)

Increase government spending will shift IS and hence AD curve to the right. Production cost does not effect AD and only effects AS. Decrease in availability of Business capital will decrease investment and so, IS will shift to the left and hence AD will shift to the left.

Hence the correct answer is (c) decreased availability of business capital

10)

Equilibrium Output and Equilibrium price attains is the economy when AD and AS intersect. Hence the correct answer is (c) intersect

Hence, the correct answer is (c) intersect