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A decrease in the supply of goods causes inflation because people are willing to pay higher prices for scarce goods.
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What will happen when Aggregate demand and aggregate supply decrease?
When aggregate demand and aggregate supply both decrease, the result is no change to price. As price increases, aggregate demand decreases, and aggregate supply increases.
What would cause a decrease in aggregate supply?
Aggregate supply is the supply of all goods and services within a country. Which of the following would most likely cause a decrease in the aggregate supply
What will happen if Aggregate demand increases and aggregate supply decreases?
An increase in aggregate demand and a decrease in aggregate supply will result in a shortage: there will be more goods and services demanded than that which is being produced.
In an aggregate demand-aggregate supply diagram what will equal decreases in government spending and taxes do?
No effect. Spending will decrease Aggregate Demand, lower taxes will raise Aggregate Demand
Because tax cuts will likely affect both aggregate demand and aggregate supply does it matter which is affected more?
Because a tax increase will cause consumption to decrease, an aggregate demand has a greater effect.
What will happen when Aggregate demand and aggregate supply decrease?
When aggregate demand and aggregate supply both decrease, the result is no change to price. As price increases, aggregate demand decreases, and aggregate supply increases.
What would cause a decrease in aggregate supply?
Aggregate supply is the supply of all goods and services within a country. Which of the following would most likely cause a decrease in the aggregate supply
What will happen if Aggregate demand increases and aggregate supply decreases?
An increase in aggregate demand and a decrease in aggregate supply will result in a shortage: there will be more goods and services demanded than that which is being produced.
What will happen if Aggregate demand increases and aggregate supply increases?
An increase in aggregate demand and a decrease in aggregate supply will result in a shortage: there will be more goods and services demanded than that which is being produced.
In an aggregate demand-aggregate supply diagram what will equal decreases in government spending and taxes do?
No effect. Spending will decrease Aggregate Demand, lower taxes will raise Aggregate Demand
Because tax cuts will likely affect both aggregate demand and aggregate supply does it matter which is affected more?
Because a tax increase will cause consumption to decrease, an aggregate demand has a greater effect.
Why does aggregate demand go up when money supply increases?
It doesn't. Money supply has no effect on aggregate demand. Aggregate demand is only effected by the buying power of money, real interest rate, and the real prices of exports and imports. If the supply of money goes up it only causes a short term decrease in the nominal interest rate. The price level is not accompanied by a decrease in the supply of money so the real interest rate does not rise.
Concern about an international crisis has caused consumers to save their money and postpone big purchases. What is the effect on aggregate demand and aggregate supply?
aggregate demand will decrease, lowering both real GDP and the price level
Concern about an international crisis has caused consumers to save their money and postpone big purchases what is the effect on aggregate demand and supply?
aggregate demand will decrease, lowering both real GDP and the price level
A decrease in government spending will cause a?
decrease in aggregate demand
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.
What is the key difference between the classical and Keynesian aggregate supply functions?
Classical Aggregate Supply function is vertical whereas the Keynesian Aggregate Supply function is positively sloped.
