AD-AS

Question 1

What is aggregate supply

Answer 1

Is the relationship between the quantity of real GDP supplied and the price level

Question 2

What is long run aggregate supply

Answer 2

The relationship between the quantity of real GDP supplied and the price level when real GDP is equal to potential GDP

Question 3

What is long run aggregate supply

Answer 3

The relationship between the quantity of real GDP supplied and the price level when real GDP is equal to potential GDP

Question 4

What is short-run aggregate suppl6

Answer 4

Is the relationship between the quantity of real GDP supplied and the price level when the money wage rate, prices of other resources, and potential GDP remain constant

Question 5

When does AS change

Answer 5

Changes if an influence on production plans other than price level changes

Question 6

What are the 2 influences that change assregate supply

Answer 6

1. Change in potential GDP
2. Chafe in money wage rate (and other factor prices)

Question 7

What are the 3 reasons that cause potential GDP to change

Answer 7

1. An increase in the full employment quantity of labor
2. An increase in capital (both physical and human )
3. An advance in technology

Question 8

What happens to LAS and SAS if potential GDP increase

Answer 8

They also increase, and shift rightward

Question 9

What happens to LAS and SAS if potential GDP increase

Answer 9

They also increase, and shift rightward

Question 10

What happens to LAS and SAS if money wage rate rises

Answer 10

LAS is unchanged
SAS decreases and shifts leftward

Question 11

Buying plans depend on many factors, what are the 4 main ones

Answer 11

Expectations
Price level
Fiscal policy and monetary policy
The world economy

Question 12

What are the two main reasons that an AD curve sloped downward

Answer 12

Wealth effect
Substitution effects

Question 13

How does weath effect work

Answer 13

Other things remaining the same, an increase in price level
Decreases real wealth (money, stocks, etc)

And to restore their wealth people, increase saving and decrease spending
And the quantity of real expenditure decreases

Question 14

How does intertemporal substitution work

Answer 14

Other things remaining the same, an increase in price level
Decreases the real value of money
And raises the interest rate

When the interest rate rises, people borrow and spend less

And this decreases the quantity of real GDP demanded

Question 15

How does international substitution effect work

Answer 15

Other things remaining the same, a rise in price level
Increases the price of domestic goods relative to foreign goods

And this increases imports and decreases exports
And decreases the quantity of real GDP demanded

Question 16

When does AD change

Answer 16

If a change in any influence on buying plans other than price level change

Question 17

What are the main influences on AD 3

Answer 17

Expectations
Fiscal policy and monetary policy
The world economy

Question 18

What happens to AD if expectations increase

Answer 18

Directly proportional toAD so if they increase AD will increase

Question 19

When does short run macroeconomic equilibrium occur

Answer 19

When the quantity of real GDP demanded = quantity of real GDP supplied

Question 20

When does long-run macroeconomic equilibrium occur?

Answer 20

When real GDP is equal to potential GDP