National Income and Price Determination

It shifts the long-run aggregate supply curve outward.

It has no direct effect on aggregate supply.

It decreases short-run aggregate supply.

It increases short-run aggregate supply.

When the quantity of aggregate demanded is equal to the quantity of aggregate supply

When the current output is also equal to potential output

When the price level is at its highest point in the short run

When the economy is producing at its maximum potential output in the short run

Lowers equilibrium price level and output.

Increases equilibrium price level and output.

Remains constant at higher levels of inflation and real GDP.

Depresses equilibrium price level and output.

The AS curve shifts left reflecting higher production costs.

The AD curve shifts right reflecting higher net exports.

The AS curve shifts right reflecting expanded production capacity.

The AD curve shifts left reflecting lower consumer spending power.

Long-run equilibrium at a lower price level and potential output unchanged.

Long-run equilibrium at the same price level but with increased potential output.

Short-term deflation followed by rapid inflation due to increased money supply.

Continuous cycles of recession as businesses cannot adapt to changing price levels.

An increase in consumption spending

An increase in money supply

A decrease in input prices

A decrease in exports

The aggregate demand curve will shift left resulting in lower overall price levels.

The long-run aggregate supply curve will shift right indicating potential economic growth.

The aggregate demand curve will shift to the right causing an inflationary gap.

The short-run aggregate supply curve will shift to the left causing a recessionary gap.

A direct injection of liquidity into capital markets that stimulates an outward shift of LRAS reflecting increased productivity.

A decrease in the money multiplier effect causing a leftward shift of AD due to reduced lending capability of banks.

An immediate increase in real GDP as banks extend more loans due to higher reserves leading to greater investment spending.

An expansionary fiscal impact that results from lower governmental borrowing costs enhancing public sector expenditure possibilities.

When the quantity of aggregate demanded is equal to the quantity of aggregate supply

When the current output is also equal to potential output

When the price level is at its highest point in the short run

When the economy is producing at its maximum potential output in the short run

Aggregate supply moves leftward owing to increased costs of production from unexpected inflows of capital.

Interest rates automatically rise due to government intervention influencing exchange rates.

Aggregate demand shifts rightwards due to increased foreign spending on domestic goods.

The natural rate of unemployment changes because net exports are unrelated to employment levels.