1.A decrease in aggregate supply can result in: A. a recession. B. cost-push inf
ID: 1095886 • Letter: 1
Question
1.A decrease in aggregate supply can result in:
A.
a recession.
B.
cost-push inflation.
C.
demand-pull inflation.
D.
unemployment.
2.In the short run (intermediate range) of the aggregate supply curve, higher aggregate demand will increase
A.
the price level but reduce real GDP.
B.
real GDP without raising the price level.
C.
the price level without affecting real GDP.
D.
both the price level and real GDP.
Which of the following helps explain why real GDP is inversely related to the price level within the framework of the AD-AS model?
A.
As prices fall, domestic consumers have an incentive to buy more of the cheaper goods and services.
B.
As prices fall, the wealth of people holding the fixed quantity of money increases, causing them to expand their purchases of goods and services.
C.
As prices fall, the government will have to reduce taxes, which will lead to an increase in the quantity of goods and services purchased.
D.
As prices fall, the monetary authorities will have to increase the money supply, which will lead to an increase in the quantity of goods and services purchased.
A.
a recession.
B.
cost-push inflation.
C.
demand-pull inflation.
D.
unemployment.
Explanation / Answer
1. A Decrease in Aggregate supply can result in:
Cost push inflation, reduction in the supply of goods and service shall bid up prices of these goods and services. It shall affect the unemployment indirectly. Hence correct option is (B)
2. In the intermediate range, there is increase in the Real GDP and price level. Both increase, Hence correct option is (D)
3. Here correct (A) purchasing power of people increase and they demand more that lead to increase in the production of goods and services.
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