ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate demand curve shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.

Detailed explanation-2: -When both AD and AS increase, the real GDP will increase. The effect of the increment on inflation will, however, depend on the magnitude of the changes. Note that an increase in AD will increase the price level. On the other hand, an increase in AS will decrease the price level.

Detailed explanation-3: -If the aggregate supply-also referred to as the short-run aggregate supply or SRAS-curve shifts to the right, then a greater quantity of real GDP is produced at every price level. If the aggregate supply curve shifts to the left, then a lower quantity of real GDP is produced at every price level.

Detailed explanation-4: -Since modern economists calculate aggregate demand using a specific formula, shifts result from changes in the value of the formula’s input variables: consumer spending, investment spending, government spending, exports, and imports.

Detailed explanation-5: -Movements of either AS or AD will result in a different equilibrium output and price level. The aggregate supply curve will shift out to the right as productivity increases. It will shift back to the left as the price of key inputs rises, and will shift out to the right if the price of key inputs falls.