H Explain causes of movements along and shifts in aggregate demand and supply curves

Question 1

Movements along Agg. D curve

Answer 1

A change in the price level

Question 2

Movements along Agg. D curve

Answer 2

A change in the price level

Question 3

Movements along Agg. S curve

Answer 3

A change in the Plevel

Question 4

Shifts in Agg. D curve

Answer 4

+; Qd goods and services is greater at any price level

+ agg. demand
+ Consumers wealth; +C
+Optomism; +I
+Future Inc; +C
+Capacity utilization; +I
+Expansionary monetary policy; +C +I
Expansionary FISCAL policy; decreasing Gov budget surplus (G-T); increasing (g-t) gov budget deficit from decreasing T or increasing G. -T = +C, +G = +AggD
Exchange rates; a decrease in relative value of a countrys currency will +exports and -imports to +AggD, +Net X
+Global Economic Growth will +Imp (domestic x) that foreigners demand, +Net X inc.

Question 5

Shifts in SRAgg. S curve (reflects relationship between output and price level when wages and other input prices are held constant, or slow to adjust to higher output prices.)

Answer 5

SRAS curve shows the total level of output that businesses are willing to supply at different price levels.

SRAS curve shift to the right;Qs at each Plevel increases

Labor Prod +; unit cost to producers is decreased>producers will +output

Input Prices, dec. prices = +output

Expectations of future output prices, expected price+ = +output

Taxes and Gov subsidies, -business taxes or +Gov subs will decrease costs of prod, so firms will +output

Exchange rates, Strong currency relative foreign will decrease cost of imports

Question 6

Shifts in LRAS

Answer 6

+Qs labor and quality of labor
+Qs natural resources
+Stock of physical capital>+potential output
+Tech> +labor productivity

Question 7

Movements along Agg. S curve

Answer 7

A change in the Plevel

Question 8

Shifts in Agg. D curve

Answer 8

+; Qd goods and services is greater at any price level

+ agg. demand
+ Consumers wealth; +C
+Optomism; +I
+Future Inc; +C
+Capacity utilization; +I
+Expansionary monetary policy; +C +I
Expansionary FISCAL policy; decreasing Gov budget surplus (G-T); increasing (g-t) gov budget deficit from decreasing T or increasing G. -T = +C, +G = +AggD
Exchange rates; a decrease in relative value of a countrys currency will +exports and -imports to +AggD, +Net X
+Global Economic Growth will +Imp (domestic x) that foreigners demand, +Net X inc.

Question 9

Shifts in SRAgg. S curve (reflects relationship between output and price level when wages and other input prices are held constant, or slow to adjust to higher output prices.)

Answer 9

SRAS curve shows the total level of output that businesses are willing to supply at different price levels.

SRAS curve shift to the right;Qs at each Plevel increases

Labor Prod +; unit cost to producers is decreased>producers will +output

Input Prices, dec. prices = +output

Expectations of future output prices, expected price+ = +output

Taxes and Gov subsidies, -business taxes or +Gov subs will decrease costs of prod, so firms will +output

Exchange rates, Strong currency relative foreign will decrease cost of imports

Question 10

Shifts in LRAS

Answer 10

+Qs labor and quality of labor
+Qs natural resources
+Stock of physical capital>+potential output
+Tech> +labor productivity

Question 11

The sustainable growth rate of real GDP is most likely to be increased by:
A) an increase in government spending.
B) an increase in the propensity to consume by households.
C) the discovery of untapped oil fields.
Your answer: B was incorrect. The correct answer was C) the discovery of untapped oil fields.
Sustainable growth in real GDP is defined as the growth rate in real GDP that is sustainable over the long term. The sustainable growth rate is positively affected by increases in the supply of natural resources, the supply of physical capital, or the supply or productivity of labor. An increase in government spending does not increase an economy’s sustainable growth rate.

Answer 11

The sustainable growth rate of real GDP is most likely to be increased by:
A) an increase in government spending.
B) an increase in the propensity to consume by households.
C) the discovery of untapped oil fields.
Your answer: B was incorrect. The correct answer was C) the discovery of untapped oil fields.
Sustainable growth in real GDP is defined as the growth rate in real GDP that is sustainable over the long term. The sustainable growth rate is positively affected by increases in the supply of natural resources, the supply of physical capital, or the supply or productivity of labor. An increase in government spending does not increase an economy’s sustainable growth rate.