Question

p Ali Hassan Al Ahmed Moodle Points out of 1.50 a. close an expansionary gap Ob. close a recessionary gap O c raise bond prices 41 4243 4445 qwestion 46 47 Finish attempt Queston 23 Not yet The basic aggregate demand and aggregate supply curve model helps explain Time left 1:07:33 Points out of 1.50 Select one O a. the fluctuations in real GDP and the price level. b, Output fluctuations in an individual market. O c only long term growth. O d price fluctuations in an individual market 24 An increase increase in in aggregate demand causes an increase in only in the short run, but causes an Not yet in both the short run and the long run. Points out of 130 F Flag Select one O a. the price level; the price level O b the price level: real GDP O c. real GDP real GDP d. real GOP; the price level Queston 25 A credit crunch will cause the economys PAE function to Not yet Points out of P Flag Select one a. Shift upward. b. Shift downiward O Not shift

Answer 1

(Question 23) Option (a)

The AD-AS model helps understand the changes in aggregate price level and aggregate real output in the economy.

(Question 24) Option (d)

An increase aggregate demand will shift the AD curve to right, which increases both price level and real GDP in short run, creating an inflationary gap. In the long run, higher price level will raise the cost of inputs for firms, so firms will decrease output. Aggregate supply will decrease, shifting the short run aggregate supply curve to left until long run equilibrium is reached at original level but at a further higher price level, restoring real GDP to the initial potential GDP level.

(Question 25) Option (b)

A credit crunch increases interest rate and decreases investment, which decreases planned aggregate expenditure, shifting PAE curve downward.