ECONOMICS
AGGREGATE SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -A higher price level makes a country’s exports fall and imports rise, reducing net exports. A lower price level will increase exports and reduce imports, increasing net exports. This impact of different price levels on the level of net exports is called the international trade effect.
Detailed explanation-2: -Domestic prices also have an impact on Net Exports (NX) through what is called the foreign purchases effect. When US prices rise relative to world prices, foreigners buy fewer US goods and Americans buy more foreign goods, so NX fall.
Detailed explanation-3: -The amount of output supplied will be greater than aggregate demand. Prices will begin to fall to eliminate the surplus output. As prices fall, the amount of aggregate demand increases and the economy returns to equilibrium.
Detailed explanation-4: -Answer and Explanation: a. short-run aggregate supply shifts right would cause prices to fall and output to rise in the short run. The aggregate supply curve slopes upwards owing to the direct relationship between aggregate supply and price level.