Changes in the AD-AS Model - AP Macroeconomics

1. What is the short-run effect on real GDP if both AD and AS decrease?

   Real GDP decreases. Both curves shifting left reduces equilibrium output.

2. What happens to AD when consumer confidence increases?

   AD shifts right. Higher confidence increases consumption, boosting aggregate demand.

3. What is the short-run effect on price level if AS shifts left?

   Price level rises. Leftward AS shift reduces supply, raising price level.

4. What happens to equilibrium real GDP if AS shifts right?

   Real GDP increases. Rightward AS shift increases output at every price level.

5. What is the short-run effect on the price level with a rightward AD shift?

   Price level rises. Rightward AD shift increases demand, raising price level.

6. What is the impact on price level if both AD and AS increase?

   Indeterminate. Opposite effects on price make the net result uncertain.

7. What happens to AS in the short run when input prices rise?

   AS shifts left. Higher input costs reduce profitability, decreasing supply.

8. What effect on AS might result from an increase in energy prices?

   AS shifts left. Higher energy costs increase production costs, reducing supply.

9. Identify the effect on real GDP if AD increases.

   Real GDP increases. Higher demand leads to increased production and output.

10. What does AS stand for in the AD-AS model?

    Aggregate Supply. Represents total supply of goods and services in an economy.

11. What curve shifts in response to a change in monetary policy?

    AD curve. Monetary policy affects spending through interest rates.

12. What is the effect on real GDP when AS increases in the short run?

    Real GDP increases. Greater supply increases output at every price level.

13. What is the effect on AD if consumer expectations become more optimistic?

    AD shifts right. Optimism increases spending expectations and current demand.

14. What happens to the AD curve during a financial crisis?

    AD shifts left. Financial crises reduce spending and investment confidence.

15. What is the effect on AS if there is a reduction in regulation?

    AS shifts right. Reduced regulation lowers costs, increasing supply.

16. What is the short-run effect on price level of a fall in oil prices?

    Price level falls. Lower oil prices shift AS right, reducing price level.

17. What is the short-run effect on AS if there is an increase in business taxes?

    AS shifts left. Higher business taxes increase costs, reducing supply.

18. What is the short-run impact on the price level when AD decreases?

    Price level falls. Lower demand with fixed supply reduces equilibrium price.

19. Identify the effect on the equilibrium price level if AD increases.

    Price level rises. Increased demand with fixed supply pushes prices higher.

20. What happens to AS in the short run if there is a technological setback?

    AS shifts left. Technological setbacks reduce productivity, decreasing supply.

21. What component of AD is influenced by investment spending?

    Investment. Investment spending is a key component of aggregate demand.

22. What does AD stand for in the AD-AS model?

    Aggregate Demand. Represents total demand for goods and services in an economy.

23. What is the effect on AS of a decrease in labor costs?

    AS shifts right. Lower labor costs reduce production costs, increasing supply.

24. What is the effect on AD if there is an increase in net exports?

    AD shifts right. Higher net exports directly increase aggregate demand.

25. What is the short-run impact on price level when AD shifts left?

    Price level falls. Leftward AD shift reduces demand, lowering price level.

26. What axis represents real GDP in the AD-AS model?

    Horizontal axis. Standard convention for plotting output in macroeconomic models.

27. Identify the effect on price level if AS decreases.

    Price level rises. Reduced supply with fixed demand pushes prices higher.

28. What is the short-run effect on real GDP of a technological advancement?

    Real GDP increases. Technology shifts AS right, increasing output at every price.

29. What axis represents the price level in the AD-AS model?

    Vertical axis. Standard convention for plotting price level in macroeconomic models.

30. Identify the effect on real GDP if AS decreases.

    Real GDP decreases. Lower supply at each price level reduces equilibrium output.

31. What shift occurs in AD if household wealth increases?

    AD shifts right. Increased wealth boosts consumption and aggregate demand.

32. What happens to AS when productivity improves?

    AS shifts right. Higher productivity reduces per-unit costs, increasing supply.

33. What is the short-run effect on unemployment if AD increases?

    Unemployment decreases. Higher demand increases production, requiring more workers.

34. What effect does an increase in government spending have on AD?

    AD shifts right. Government spending is a direct component of aggregate demand.

35. What is the short-run impact on AS due to a natural disaster?

    AS shifts left. Disasters damage productive capacity, reducing supply.

36. What happens to AD when taxes increase?

    AD shifts left. Higher taxes reduce disposable income, decreasing consumption.

37. What component of AD is directly affected by consumer spending?

    Consumption. Consumer spending represents the largest AD component.

38. What happens to AS if there is an improvement in technology?

    AS shifts right. Technology improvements increase productivity and supply.

39. In the short run, how does a decrease in interest rates affect AD?

    AD shifts right. Lower rates stimulate investment and consumption spending.

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