3.6: Changes in the AD-AS Model

Question 1

Stagflation

Answer 1

Stagnate Economy + Inflation , still considered a recessionary gap (negative output gap)

Question 2

What happens to the price level and output in the short run when consumer spending increase?

Answer 2

Price level and Q increases due to AD

Question 3

Causes of Inflation 1.

Answer 3

Demand- Pull Inflation (AD Increases)

Demand pulls up prices. Consumers want goods and services, so they bid up prices.
“Too many dollars chasing too few goods”

Cost-Push Inflation (SRAS Decrease)
Higher production costs increase prices.

A negative supply shock increases the costs of production and forces producers to increase prices.

Question 4

Aggregate Supply and Demand Practice

Answer 4

https://www.youtube.com/watch?v=MjpSKZoQDoY