ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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higher; in both the short and long runs
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higher; in the short run but not in the long run
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lower; in both the short and long runs
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lower; in the short run but not in the long run
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Detailed explanation-1: -A positive demand shock will cause a shortage and drive the price higher, while a negative shock will lead to oversupply and a lower price.
Detailed explanation-2: -A supply shock is an unexpected event that changes the supply of a product or commodity, resulting in a sudden change in price. A positive supply shock increases output, causing prices to decrease, while a negative supply shock decreases output, causing prices to increase.
Detailed explanation-3: -More spending makes prices sticky, so inflation skyrockets in the short run.
Detailed explanation-4: -Positive demand shocks This excess demand puts upward pressure on the price level until the economy assumes a new short-run equilibrium at a higher price level ( P L 2 PL 2 PL2P, L, start subscript, 2, end subscript) and higher output ( Y 2 Y 2 Y2Y, start subscript, 2, end subscript).