ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Aggregate demand is the amount of total spending on domestic goods and services in an economy. The downward-sloping aggregate demand curve shows the relationship between the price level for outputs and the quantity of total spending in the economy.

Detailed explanation-2: -In the most general sense (and assuming ceteris paribus conditions), an increase in aggregate demand corresponds with an increase in the price level; conversely, a decrease in aggregate demand corresponds with a lower price level.

Detailed explanation-3: -The aggregate demand curve shows the relationship between the price level and real GDP demanded, holding everything else constant. – A movement along the AD curve will occur when the price level changes and the change in prices is not caused by a component of real GDP changing.

Detailed explanation-4: -The aggregate supply curve shows the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy. Sticky wages are nominal wages that are slow to fall even in the face of high unemployment and slow to rise even in the face of labor shortages.

Detailed explanation-5: -The reduction in aggregate demand or supply will cause unemployment to increase as the change in price level lead to a change in output. The price level decreases when aggregate demand decreases and increases when aggregate supply decreases.