ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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falls and unemployment rises.
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and unemployment fall.
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and unemployment rise.
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rises and unemployment falls.
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falls and unemployment is unaffected.
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Detailed explanation-1: -A decrease in aggregate demand in the short-run aggregate market results in a decrease in the price level and a decrease in real production. The level of real production resulting from the shock can be greater or less than full-employment real production.
Detailed explanation-2: -When government spending decreases, regardless of tax policy, aggregate demand decrease, thus shifting to the left. The fourth term that will lead to a shift in the aggregate demand curve is NX(e). This term means that net exports, defined as exports less imports, is a function of the real exchange rate.
Detailed explanation-3: -Tightening the money supply discourages business expansion and consumer spending and negatively impacts exporters, which can reduce aggregate demand. Monetary policy involves tools employed by a monetary authority (like a central bank), such as changing interest rates or reserve requirements.
Detailed explanation-4: -The Short-Run Aggregate Supply Curve (SRAS) The SRAS curve shows that as the price level increases and you move along the SRAS, the amount of real GDP that will be produced in an economy increases. An increase in the SRAS is shown as a shift to the right.