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Why doesn't an increase in aggregate demand translate directly into an increase in real GDP
An Economic Expansion
Reasons for the rising demand of land are: increase in population. loss of arable land.
what's the answer?
REal GDP will increase , inflation will increase, and unemployment will decrease
Why doesn't an increase in aggregate demand translate directly into an increase in real GDP
An Economic Expansion
Reasons for the rising demand of land are: increase in population. loss of arable land.
what's the answer?
REal GDP will increase , inflation will increase, and unemployment will decrease
Rising GDP (Gross Domestic Product) creates an increase in the money supply. However the stock market needs an increase in GDP to make profits, and to much GDP causes higher inflation which is a big concern in China. The easy way to define inflation is, if inflation increases by 8% and your pay check only increases by 4% in that same year, your money is now worth 4% less than the previous year.
...of production may be rising? Answer: Because of increase in demand.
A actual increase in GDP.
AD INCREASES AS DECREASES As the AD/AS model exhibits (exactly the same as Demand and Supply model except Price Level instead of Price and output or real GDP instead of quantity) an increase in AD leads to an inrease in both price level and output. Imagine if there is an increase in demand for tomatoes. According to demand and supply the price of tomatoes will increase. Expand this on a macro scale. When the Aggregate demand for goods and services increase, this pushes the price up. Also in response to this increase in demand, producers will produce more of the good to take advantage of the increased demand, leading to an increase in real GDP. If AS decreases, goods become more scarce and as long as demand is fixed, the price will increase. 'WE PAY MORE MONEY FOR RARE THINGS'. Furthermore, because there is less supply output will decrease. Putting these effects together, both will lead to an increase in price level. The effect on output depends on which force is larger.
A decrease in aggregate demand, an increase in the reserve requirement, an increase in the discount rate, increase in interest rates, a decrease in government spending.
They are constant at equilibrium GDP.
an Economic Expansion