1. What impact would an increase in AD, in the vertical range of AS, will have on GDP and the price level according to the AD/AS model? Explain the reasons to score high marks.
2.. If the economy is operating in the short run AS curve and aggregate demand falls, what is likely to happen to real GDP, Price level, Unemployment and why? Would you suggest the economy will face a recessionary gap or inflationary gap?
Q.1
Ans.
Although both fiscal and monetary policy can alter aggregate demand, they do so through differing channels with differing impact on the composition of aggregate demand.
- If the rising aggregate demand is accompanies with no monetary accommodation, rising aggregate demand leads to higher interest rates immediately , higher prices and lower real GDP
- Government spending increases have a much bigger effect on GDP than similar size social transfers because the latter are not considered permanent, although real interest rates rise as monetary authorities react to rises in aggregate demand and inflation.
- If the rising aggregate demand is with monetary accommodation , the larger multiplier effects with monetary accommodation result from rises in aggregate demand and inflation, leading to falls in real interest rates and additional private sector spending and GDP.
1. What impact would an increase in AD, in the vertical range of AS, will have...
1. What impact would an increase in AD, in the vertical range of AS, will have on GDP and the price level according to the AD/AS model? Explain the reasons to score high marks. Ans: 2.. If the economy is operating in the short run AS curve and aggregate demand falls, what is likely to happen to real GDP, Price level, Unemployment and why? Would you suggest the economy will face a recessionary gap or inflationary gap? Ans:
2.. If the economy is operating in the short run AS curve and aggregate demand falls( decrease) , what is likely to happen to real GDP, Price level, Unemployment and why? Would you suggest the economy will face a recessionary gap or inflationary gap?
2.. If the economy is operating in the short run AS curve and aggregate demand falls, what is likely to happen to real GDP, Price level, Unemployment and why? Would you suggest the economy will face a recessionary gap or inflationary gap? Ans:
2.. If the economy is operating in the short run AS curve and aggregate demand falls, what is likely to happen to real GDP, Price level, Unemployment and why? Would you suggest the economy will face a recessionary gap or inflationary gap? Ans:
Ans: O 2.. If the economy is operating in the short run AS curve and aggregate demand falls, what is likely to happen to real GDP, Price level, Unemployment and why? Would you suggest the economy will face a recessionary gap or inflationary gap? Ans: words English (Canada) 1 100% + GI
1. What impact would an increase in AD, in the vertical range of AS, will have on GDP and the price level according to the AD/AS model? Explain the reasons to score high marks. Ans: IF
()-run equilibrium occurs at the intersection of the aggregate demand curve, AD, and the short-run aggregate supply curve, SRAS.() ▼ Long Short -run equilibrium occurs at the intersection of AD and the long-run aggregate supply curve, LRAS. Any unanticipated shifts in aggregate demand or supply are called aggregate demand or aggregate supply() ▼ shocks externalities . When aggregate demand decreases while aggregate supply is stable,() ▼ a recessionary an inflationary gap can occur, defined as the difference between how much...
If the aggregate demand (AD) curve and the aggregate supply (AS) curve intersects at the level of real GDP less than potential GDP, there is a recessionary gap an above full-employment equilibrium an inflationary gap a falling real GDP
Unit 3: Aggregate Demand, Aggregate Supply, and Fiscal Policy AD, AS, and LRAS Short Run vs. Long Run Aggregate Supply Draw the economy at full employment 1. In the short run, wages and resource prices will as price levels increase 2. In the long run, wages and resource prices will as price levels increase Shifters of AD and AS Shifters of Aggregate Demand Shifters of Aggregate Supply imi Recessionary Gap Draw an economy in a recession Inflationary Gap Draw an...
The following table shows the initial level of aggregate demand (AD) and te supply (AS) for the economy of Adanac. The full-employment level of output is $500 billion. a. Draw the corresponding initial aggregate demand and aggregate supply curve (AD0 and AS0). b. What is the initial equilibrium price level and level of real GDP? c. At this initial equilibrium (AD0 and AS0), is Adanac experiencing either a recessionary or inflationary gap? If so, how large a gap exists? d. Suppose the aggregate demand in...