2.4.3- Equilibrium levels of national output

Question 1

Where is equilibrium

Answer 1

Where ASAD meet to determine the level of output, employment and prices

Question 2

What is the impact of a shift

Answer 2

Changes equilibrium, impacts unemployment, inflation and economic growth

Question 3

Where does unemployment exist on a AS curve

Answer 3

below YFE

Question 4

Where does inflation exist on AS curve

Answer 4

beyond YFE

Question 5

How is economic growth displayed on a AS diagram

Answer 5

outward shift of LRAS or in AD

Question 6

Explain what happens if AD increases on a Classical Model

Answer 6

There is short run equilibrium where AD1 and SRAS meet
SRAS shifts inwards as wages and costs ajust
New eqiulibrium at AD1, SRAS1 and LRAS produce YFE

Question 7

Explain what happens if AD decreases on a Classical Model

Answer 7

There is short run equilibrium where AD1 and SRAS meet, unemployment!
SRAS shifts outwards as wages and costs ajust expectations
New eqiulibrium at AD1, SRAS1 and LRAS produce YFE