Supply and Demand Aggregrate

a. Refer to the above diagram. A decline of aggregate supply from ASLR1 to ASLR2, followed by a decline of aggregate demand from AD1 to AD2, would you describe?

a. What did happen if a decrease in aggregate supply from ASLR1 to ASLR2, followed by a decrease in aggregate demand from AD1 to AD2?

Solutions

Expert Solution

Aggregate supply refers to the total amount of output that enterprises will generate and sell—in other words, real GDP. The upward-sloping aggregate supply curve, also known as the short run aggregate supply curve, depicts the short-term positive relationship between price level and real GDP. Because the prospect for higher profits drives more production when the price level for outputs rises but the price level for inputs remains constant, the aggregate supply curve slopes upward.

a. P is in a constant state while Q is decreasing. US and AD rates decreased over time. The decline in AD and the US could occur due to the effect of decreasing public income, the need for these goods is reduced or not really needed because of the existence of other subsidized goods, and it could also be because the unemployment rate has an effect on one's income.

b. Community income due to unemployment, job layoffs, and others will cause a decrease in income. If income decreases, people's purchasing power will decrease, and society will reduce spending. Because people's purchasing power is reduced, production companies will also reduce their production to adapt to the conditions of society.

Cinnamon answered 2 years ago

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