Question

5If foreign real national income decreases, will aggregate demand (AD) shift up and to the right or down and to the left? Show on a graph.

6If money from the Federal Reserve increases, will aggregate demand (AD) shift up and to the right or down and to the left? Show on a graph.

7If the wage rate decreases, will the short run aggregate supply (SRAS) shift up and to the left or down and to the right. Show on a graph

8 If productivity increases, will the short run aggregate supply (SRAS) shift up and to the left or down and to the right. Show on a graph.

9 If there is a negative shock to the economy (like coronavirus), will the short run aggregate supply (SRAS) shift up and to the left or down and to the right. Show on a graph.

10 What is the relationship between GDP and the unemployment rate? Show on a graph.

Answer 1

Answer 5:

If foreign real national income decreases, this reduces the level of Net Exports of the nation because total value of exports of the nation will decrease. As exports decreases, the level of aggregate demand decreases and shits down and to the left.

Answer 6:

As money supply in the economy increases, rrate of interest decreases which increases level of investment and thus increases the level of aggregate demand. Thus, AD curve will shift up and to the right.

Answer 7:

A decrease in the level of wages will reduce the cost of production in the economy and thus quantity supplied increases at each price level, this leads to Aggregate supply curve shifting down and to the right.

Answer 8:

Increase in productivity will shift the aggregate supply curve to the right because quantity supplied increases at each unit of the output produced. Thus, AS shifts downwards to right.

Answer 9:

A negative supply shock has disrupted the supply chains in the economy and this has led to leftward shift of the Short Run Aggregate supply curve of the economy.

Answer 10;

As GDP increases, the level of production in the economy increases, this increases demand for labor and thus reduces unemployment rate in the economy. Thus, there exists negative relationship between GDP and unemployment rate in the economy.