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When aggregate supply exceeds aggregate demand what will happen to the price level?
The price will go down.
What will happen to the equilibrium price level and the real GDP if the aggregate demand decreases and aggregate supply decreases?
The equilibrium price level increases, but the real GDP change depends on how much aggregate demand and aggregate supply change by.
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
Why aggregate spending decrease as the price level increases?
Because if a price level is higher for a good, aggregate spending will decrease as the level of the price increases. And vice versa - the cheaper a good is, OR the MORE that your money will buy, the more likely you are to spend that money.
Does a change in price level shift the aggregate demand curve?
Yes
When aggregate supply exceeds aggregate demand what will happen to the price level?
The price will go down.
Aggregate demand and Aggregate supply curve?
The aggregate demand curve show what consumers are willing to buy at a given price level, whereas the aggregate supply curve shows what producers are willing to produce at a given price level.
What will happen to the equilibrium price level and the real GDP if the aggregate demand increases and aggregate supply decreases?
The equilibrium price level increases, but the real GDP change depends on how much aggregate demand and aggregate supply change by.
What will happen to the equilibrium price level and the real GDP if the aggregate demand decreases and aggregate supply decreases?
The equilibrium price level increases, but the real GDP change depends on how much aggregate demand and aggregate supply change by.
What will happen to the equilibrium price level and the real GDP if the aggregate demand decreases and aggregate supply increases?
The equilibrium price level increases, but the real GDP change depends on how much aggregate demand and aggregate supply change by.
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
If both aggregate output and the aggregate price level increase what will happen?
a decrease in need which will in turn surplus the output and decrease the price level. then output will decrease.
Why aggregate spending decrease as the price level increases?
Because if a price level is higher for a good, aggregate spending will decrease as the level of the price increases. And vice versa - the cheaper a good is, OR the MORE that your money will buy, the more likely you are to spend that money.
An increase in the aggregate price level will increase?
a clause in a contarct that automatically increases wages to account for increases in the price level
Does a change in price level shift the aggregate demand curve?
Yes
In which range of the aggregate supply curve is the price level constant?
Horizontal.
Suppose that the government reduces taxes on imported consumer goods. Use the model of aggregate demand and aggregate supply to explain what would happen to the price level and the output level of the economy in the short run?
The model of aggregate demand and aggregate supply can be used to explain what would happen to the price level and output level of the economy in the short run if the government reduces taxes on imported consumer goods. This can be illustrated with a diagram. In the diagram, the aggregate demand (AD) curve is downward sloping and the aggregate supply (AS) curve is upward sloping. The equilibrium price level is determined by the intersection of the two curves. Initially, the equilibrium price level is P1 and the equilibrium output level is Y1. When the government reduces taxes on imported consumer goods, the aggregate demand curve shifts to the right. This shift is represented by the movement from AD1 to AD2 in the diagram. The new equilibrium price level is P2, which is lower than the original price level. The new equilibrium output level is Y2, which is higher than the original output level. In summary, the reduction in taxes on imported consumer goods leads to a decrease in the price level and an increase in the output level in the short run. This is due to an increase in aggregate demand.
