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When aggregate supply exceeds aggregate demand, it typically leads to an excess of goods and services in the economy, resulting in downward pressure on prices. This situation can cause businesses to reduce production, leading to lower employment levels and potentially triggering an economic slowdown. If sustained, it may prompt policymakers to implement measures to stimulate demand, such as monetary easing or fiscal stimulus. Overall, this imbalance can signify economic inefficiencies that require correction.
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When aggregate demand exceeds aggregate supply which of these is MOST likely to result?
A budgetary surplus
When aggregate supply exceeds aggregate demand what will happen to the price level?
The price will go down.
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 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.
Fiscal and monetary policies are used to shift the aggregate supply curve or the aggregate demand curve?
Aggregate demand curve.
When aggregate demand exceeds aggregate supply which of these is MOST likely to result?
A budgetary surplus
When aggregate supply exceeds aggregate demand what will happen to the price level?
The price will go down.
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.
The quantity of full employment in the aggregate supply aggregate demand model is similar to the conditions in which other model?
The quantity of full employment in the aggregate supply aggregate demand model is similar to the conditions in which other model. (Market Supply and Demand.)
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.
Fiscal and monetary policies are used to shift the aggregate supply curve or the aggregate demand curve?
Aggregate demand curve.
Can the aggregate demand curve move independently of the aggregate supply curve?
Yes, the aggregate demand curve can move independently of the aggregate supply curve. Factors such as changes in consumer confidence, monetary policy, and fiscal policy can shift the aggregate demand curve without directly affecting aggregate supply. For example, an increase in government spending can boost aggregate demand while aggregate supply remains unchanged in the short term. However, over time, changes in demand can influence supply as businesses adjust to new economic conditions.
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
What is aggregate shock?
In economics, the supply curve in the aggregate supply and demand model shifts drastically to the left due to an inadequacy of resources or because the demand overpowers the supply.
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
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.
