Equilibrium Real National Output

Question 1

When does Equilibrium National Output occur

Answer 1

Injections = Leakages

Question 2

What does an increase in AD lead to

Answer 2

Expansion of aggregate supply

Higher equilibrium level of national output

Question 3

What does an outward shift of AD lead to in terms of output and employment

Answer 3

Cyclical rise in output and employment

Question 4

What does a decrease in AD lead to

Answer 4

Contraction of AS

Lower equilibrium level of national output

Question 5

What does an increase in Aggregate Supply lead to

Answer 5

Expansion of AD

Higher equilibrium level of national output

Question 6

What does a fall in Aggregate Supply lead to

Answer 6

Contraction of AD

Lower equilibrium level of national output

Inward shift of AS

Question 7

Consequences of fall in AS

Answer 7

Higher inflation

Reduction in Real GDP Growth

Lower profits, investment, employment

Trade balance can get worse