ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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prices to rise and output to rise.
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prices to fall and output to remain unchanged.
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prices to fall and output to fall.
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prices to rise and output to remain unchanged.
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Detailed explanation-1: -If there is an increase in aggregate demand, the price level will go up. Once wages have adjusted to that inflation in the long run, SRAS decreases and returns the economy to full employment output. Shocks do not cause economic growth, only changes in full employment output cause economic growth.
Detailed explanation-2: -This downward slope indicates that increases in the price level of outputs lead to a lower quantity of total spending. The graph shows a downward sloping aggregate demand curve, showing that, as the price level rises, the amount of total spending on domestic goods and services declines.
Detailed explanation-3: -A money supply increase will tend to raise the price level in the long run. A money supply increase may also increase national output. A money supply increase will raise the price level more and national output less the lower the unemployment rate of labor and capital is.
Detailed explanation-4: -The aggregate demand/aggregate supply model is a model that shows what determines total supply or total demand for the economy and how total demand and total supply interact at the macroeconomic level. Aggregate supply is the total quantity of output firms will produce and sell-in other words, the real GDP.