Question

A)Why do net exports tend to rise during recessions?

B)What is stagflation exactly?

C) What’s the difference between a demand curve and an aggregate demand curve, and b) the difference between a supply curve and an aggregate supply curve?

D) What do most economists agree the AS curve actually looks like?

Answer 1

A. During a recession, people tend to produce save a larger proportion of their income thereby leading to a fall in imports. At the same time, the central bank reduces the interest rates which makes exports cheaper. So, there is a rise in exports. That is why net exports tend to rise during recession.

B. Stagflation is the condition in which there is slow growth in the economy with high unemployment and high inflation rates combined with a stagnant demand.

C. The demand curve is shows the different quantities that a consumer demand at different prices. On the other hand, the aggregate demand curve shows the demand of the entire market. It is the sum of demands of all the individuals in the economy at different prices.

The supply curve shows the different amounts that a seller is willing to sell at different prices. On the other hand, the aggregate supply curve shows the sum of all the individual supplies in the economy at different prices.

D. The economists agree that the long-run aggregate supply curve is vertical which shows that the changes in aggregate demand temporarily changes the aggregate supply. So, the long-run aggregate supply curve is vertical.