Which one of the following factors will most likely cause an increase in aggregate demand?
An increase in net exports
. Suppose workers become pessimistic about their future employment, which causes them to save more and spend less.
Which of the following could cause an unanticipated increase in both the inflation rate in the unemployment rate?
When the aggregate demand curve shifts rightward, the price level______ and the unemployment rate______. Which of the following could cause an unanticipated increase in both the inflation rate and the unemployment rate?
An unanticipated increase in energy prices
.
Which of the following will most likely accompany an unanticipated increase in aggregate demand?
Which of the following is most likely to accompany an unanticipated increase in short-run aggregate supply?
falling real wages and resource prices that will increase SRAS, moving the economy back toward full employment
.
Which will most likely increase aggregate supply?
When the demand increases the aggregate demand curve shifts to the right. In the long-run, the aggregate supply is affected only by capital, labor, and technology. Examples of events that would increase aggregate supply include
an increase in population, increased physical capital stock, and technological progress
.
Which of the following is likely to result from a rapid rise in aggregate demand?
A rapid rise in AD is likely to cause
demand-pull inflation
.No, the balance of payments is more likely to move into deficit. A rapid rise in AD is likely to lead to inflation. This may cause a depreciation, which may lead to a deficit on the balance of payments.
What are the factors that affect aggregate supply?
A shift in aggregate supply can be attributed to many variables, including
changes in the size and quality of labor
, technological innovations, an increase in wages, an increase in production costs, changes in producer taxes, and subsidies and changes in inflation.
What is sras curve?
The short-run aggregate supply curve (SRAS)
lets us capture how all of the firms in an economy respond to price stickiness
. When prices are sticky, the SRAS curve will slope upward. The SRAS curve shows that a higher price level leads to more output. There are two important things to note about SRAS.
What is the relation between inflation and unemployment?
Historically, inflation and unemployment have maintained
an inverse relationship
, as represented by the Phillips curve. Low levels of unemployment correspond with higher inflation, while high unemployment corresponds with lower inflation and even deflation.
Why does unemployment cause inflation?
Inflation can cause unemployment when: The uncertainty of inflation leads to lower investment and lower economic growth in the long term. … Inflation leads
to a decline in competitiveness and lower export demand
, causing unemployment in the export sector (especially in a fixed exchange rate).
When prices rise along with rise in unemployment it is called?
What Is
Stagflation
? Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e. inflation).
What is aggregate supply formula?
Aggregate supply is the relationship between the price level and the production of the economy. … The equation used to determine the long-run aggregate supply is:
Y = Y*
. In the equation, Y is the production of the economy and Y* is the natural level of production of the economy.
What is aggregate supply and its components?
Components: Main components of aggregate supply are two, namely,
consumption and saving
. A major portion of income is spent on consumption of goods and services and the balance is saved. Thus, national income (Y) or aggregate supply (AS) is sum of consumption expenditure (C) and savings (S).
What is the difference between aggregate demand and aggregate supply?
Aggregate demand is the gross amount of services and goods demanded for all finished products in an economy. On the other hand, aggregate supply is
the total supply of services and goods at a given price
and in a given period.
Why are prices and wages sticky even when aggregate demand changes?
Prices are sticky because of things like
menu costs
and because businesses don’t know if shocks to the economy are permanent or temporary. Because wages and prices are sticky and because the economy gets stuck, Keynes said that the government needed to step in and do something to help the economy out.
Does an increase in imports increases aggregate demand?
Again, an exogenous decrease in the demand for exported goods or an
exogenous increase
in the demand for imported goods will also cause the aggregate demand curve to shift left as net exports fall.
What shifts the AS curve?
The aggregate supply curve shifts to the right as
productivity increases or the price of key inputs falls
, making a combination of lower inflation, higher output, and lower unemployment possible. … When an economy experiences stagnant growth and high inflation at the same time it is referred to as stagflation.
