All Flashcards
How do increased consumer taxes affect AD?
Higher taxes reduce disposable income, decreasing consumer spending and shifting the AD curve left.
How do tariffs on imported inputs affect SRAS?
Tariffs increase the cost of resources for firms, decreasing SRAS and shifting the SRAS curve left.
How do cheaper exports affect AD?
Cheaper exports increase foreign demand, increasing net exports and shifting the AD curve right.
How do reduced corporate taxes affect SRAS?
Lower taxes decrease production costs for firms, increasing SRAS and shifting the SRAS curve right.
How does a decrease in consumer confidence affect AD?
A decrease in consumer confidence will lead to decreased consumer spending, shifting the AD curve to the left.
How does a technological advancement affect SRAS?
Technological advancements increase productivity, leading to a decrease in production costs and shifting the SRAS curve to the right.
How does an increase in government spending affect AD?
An increase in government spending directly increases aggregate demand, shifting the AD curve to the right.
How does a rise in global demand affect AD?
A rise in global demand increases net exports (X-M), shifting the AD curve to the right.
How does an oil crisis affect SRAS?
An oil crisis is a negative supply shock, increasing production costs and shifting the SRAS curve to the left.
How does a decrease in interest rates affect AD?
A decrease in interest rates encourages investment spending, shifting the AD curve to the right.
Analyze an AD-AS graph where AD shifts left.
Price level decreases, and real GDP decreases.
Analyze an AD-AS graph where AD shifts right.
Price level increases, and real GDP increases.
Analyze an AD-AS graph where SRAS shifts left.
Price level increases, and real GDP decreases.
Analyze an AD-AS graph where SRAS shifts right.
Price level decreases, and real GDP increases.
In an AD-AS graph, what does a leftward shift of the AD curve indicate?
It represents a decrease in aggregate demand, leading to lower price levels and reduced real GDP.
In an AD-AS graph, what does a rightward shift of the SRAS curve indicate?
It represents an increase in short-run aggregate supply, leading to lower price levels and increased real GDP.
What happens to unemployment when the AD curve shifts to the left?
Unemployment increases as real GDP decreases.
What happens to unemployment when the SRAS curve shifts to the right?
Unemployment decreases as real GDP increases.
In an AD-AS model, what are the axes?
The vertical axis represents the price level, and the horizontal axis represents real GDP.
What does the intersection of the AD and SRAS curves represent?
It represents the short-run equilibrium point, where the aggregate quantity demanded equals the aggregate quantity supplied.
What are the differences between a movement along the AD curve and a shift of the AD curve?
A movement along the AD curve is caused by a change in the price level. A shift of the AD curve is caused by changes in C, I, G, or (X-M).
What are the differences between a movement along the SRAS curve and a shift of the SRAS curve?
A movement along the SRAS curve is caused by a change in the price level. A shift of the SRAS curve is caused by changes in resource costs, government actions, or productivity.
Compare and contrast fiscal policy and monetary policy.
Fiscal policy involves government spending and taxation, while monetary policy involves managing the money supply and interest rates.
What is the difference between AD and SRAS?
AD represents the total demand for goods and services, while SRAS represents the total supply of goods and services in the short run.
Compare positive and negative supply shocks.
A positive supply shock increases SRAS, while a negative supply shock decreases SRAS.
Differentiate between changes in consumer confidence and business confidence.
Changes in consumer confidence affect consumer spending (C), while changes in business confidence affect investment spending (I).
Differentiate between taxes and subsidies.
Taxes increase costs for consumers and producers, while subsidies decrease costs for consumers and producers.
Compare the effects of increased government spending and increased net exports on AD.
Both increase AD, shifting the curve to the right, leading to higher price levels and real GDP.
What is the difference between short-run and long-run aggregate supply?
SRAS is upward sloping and affected by input prices, while LRAS is vertical and determined by the economy's potential output.
Compare the effects of a decrease in taxes and a decrease in interest rates on aggregate demand.
A decrease in taxes increases disposable income, boosting consumer spending, while a decrease in interest rates encourages investment spending; both shift AD to the right.