Question

2. In order for there to be an accurate reflection of the aggregate economic indicators in a model the equilibrium aggregate real GDP and the equilibrium aggregate price level needs to

intersect.

be considered in individual markets.

only use long run curves.

4. As the aggregate price level in an economy rises, ________.

aggregate demand increases

real GDP increases   

aggregate supply increases

15. If the economy is in a recession, appropriate policies to pursue may include

a reduction in research & development spending that shifts the AS curve to the left.

an income tax cut that shifts the AD curve to the right.

a decrease in government spending that shifts the AD curve to the right.

16. The economic model of aggregate demand curve and aggregate supply curve helps explain the

expansion and contractions in individual markets.

three goals of economic policy which are economic growth, high inflation, and full employment.

shifts in real GDP and the price level.

Answer 1

2. In order for there to be an accurate reflection of the aggregate economic indicators in a model the equilibrium aggregate real GDP and the equilibrium aggregate price level needs to Intersect:

be considered in individual markets
Reason - Individual markets are influenced by factors such as the demography, income, preferences of an individual and thus, the intersection between the real GDP and price level gives the accurate reflection of the aggregate economic indicators.

4. As the aggregate price level in an economy rises, ________.

Aggregate supply increases
Reason - The law of supply applies here, which states that as the price of a commodity increases, the supply will also increase.

15. If the economy is in a recession, appropriate policies to pursue may include:

an income tax cut that shifts the AD curve to the right.
Reason - In case of a recession, the government must pursue an expansionary fiscal policy. Here, by reducing income tax, the purchasing power of individuals will rise which will shift the AD curve to the right, that is, increase it.

16. The economic model of aggregate demand curve and aggregate supply curve helps explain the:

shifts in real GDP and the price level
Reason - The interaction between the aggregate demand and aggregate supply curve shows the relationship between the real GDP and price level in the short run.