ECONOMICS (CBSE/UGC NET)

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ECONOMICS

AGGREGATE SUPPLY

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
the lower the price level, the more output is demanded on an aggregate demand diagram hence consumers can buy more goods and services with their money
A
Yes, I understand this from the notes
B
No, I don’t understand this from the notes
C
No, I don’t understand this, as I have not read the notes
D
None of the above
Explanation: 

Detailed explanation-1: -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-2: -An increase in consumer spending will cause the AD curve to increase. As a result, output increases and unemployment decreases. Unfortunately, this positive AD shock also means that inflation increases: An increase in AD leads to an increase in real GDP and the price level.

Detailed explanation-3: -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.

Detailed explanation-4: -Demand-pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply.

There is 1 question to complete.
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