Question

In: Economics

A simultaneous increase in inflation and decrease in economic growth in a country can be associated with:


Question 47 

 A simultaneous increase in inflation and decrease in economic growth in a country can be associated with:

  a decrease in aggregate demand with no change in aggregate supply.

  an increase in aggregate demand and aggregate supply.

  an increase in aggregate supply with no change in aggregate demand.

  a decrease in aggregate supply and aggregate demand.

  a decrease in aggregate supply with no change in aggregate demand.

 Question 48

 As the level of real GDP increases, the short-run aggregate supply curve:

  shifts to the right.

  shifts to the left.

  becomes flatter.

  becomes steeper.

  becomes horizontal to the real GDP axis.


Solutions

Expert Solution

Answer :

47 : Option d) a decrease in aggregate supply and aggregate demand

A decrease in aggregate supply shifts the aggregate supply curve to the left and a decrease in aggregate demand also shifts the aggregate demand curve to the left. Thus the intersection of these two new aggregate supply and aggregate demand curves results in an equilibrium level where price level is higher (inflation is high) and output is lower (decrease in economic growth).

48 : Option a) shifts to the right

A rise in the level of real GDP means higher productivity and output at any given price level. Thus this shifts the short run aggregate supply curve to the right where output is higher at any given price level.

Rahul Sunny answered 2 years ago
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