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This is in accordance to the Demand & Supply Theory...
When the demand for a product is high and its supply is low, this usually causes the price of that commodity to increase
Similarly when supply for a product is high and the demand for that product is low, it causes the price of that product to decrease.
Hence the supply is inversely related to the price of any product (Provided the Demand is in accordance to the two points mentioned above)
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∙ 15y ago
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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.
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.
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
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.
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
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 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.
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 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.
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
In which range of the aggregate supply curve is the price level constant?
Horizontal.
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.
Why the aggregate supply curve has its particular shape?
The aggregate supply curve is positively sloped because at a higher price level, producers are more willing to supply more real output.
Why aggregate supply curve is vertical?
Aggregate supply curve in the long run is vertical. This is because in the long run, wages and other input prices rise and fall to coordinate with the price level. Therefore, price level will not affect how much is supplied.
The aggregate supply curve shows the?
Level of real domestic output which will be produced at each possible price level.
Is the aggregate demand for goods and services inversely related to the price level?
yes
