Macroeconomic Equilibrium Flashcards
1
Q
When is a macro economic equilibrium established
A
When AD intersects with SRAS
2
Q
If the price is too high
A
Excess supply of output
3
Q
If the price is below equilibrium
A
Excess demand
4
Q
An outward shift of AD will bring about
A
A cyclical rise in output and employment
5
Q
An outward shift of AS should help
A
Increase business profits and print a rise in planned capital investment
6
Q
The effects of a decrease in AS will depend on
A
The cause. A fall in investment can be particularly harmful as it will also decrease the level of AD
7
Q
Causes of a fall in AS
A
- brain drain
- decline in business capital investment spending
- higher production costs
- disaster/conflict
8
Q
Macro consequences of a fall in AS
A
- inflation
- reduce GDP growth
- lower profits investment and employment
- worsen the trade balance
9
Q
All other things being equal, a rise in the global price of energy is most likely to cause
A
- inflation
- low economic growth
- unemployment
- deterioration of the balance of trade
- increase in spare capacity
- fall in business investment
- deterioration of government fiscal balance
