ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When aggregate demand is more than aggregate supply, then the planned inventory rises above the desired level due to less consumption. Therefore to clear the unwanted increase in inventory, firms plan to reduce the output production in the economy due to which the National Income falls in an economy.

Detailed explanation-2: -Answer and Explanation: The correct answer is A. A decrease in price level. Aggregate demand shifts favorably when the money supply increases and enable more consumer purchasing power.

Detailed explanation-3: -Answer and Explanation: Since the long-run aggregate supply curve is not responsive to changes in the price level, a change in the aggregate supply would result from changes in efficiency and productivity. Thus, an increase in productivity will increase the long-run aggregate supply curve to the right.

Detailed explanation-4: -Income and Wealth As household wealth increases, aggregate demand typically increases. Conversely, a decline in wealth usually leads to lower aggregate demand. When consumers are feeling good about the economy, they tend to spend more and save less.