ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

Detailed explanation-2: -As the price level rises, the real value-the purchasing power-of money and other accumulated financial assets (bonds, for instance) will decrease. People will therefore become poorer in real terms and decrease the quantity demanded of real output. The third reason is the foreign purchases effect.

Detailed explanation-3: -The aggregate demand curve shows the inverse relationship between the price level spending on real GDP. Figure 1 shows an economy that responds to a decrease in the price level by increasing the amount of aggregate demand.

Detailed explanation-4: -Which of the following best describes a relationship that is illustrated in the short-run aggregate supply (SRAS) curve? The short-run aggregate supply (SRAS) curve explicitly shows the positive relationship between the price level and output: as price level increases, so does output.

Detailed explanation-5: -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.