The Aggregate Demand-Aggregate Supply Model - AP Macroeconomics
Card 1 of 30
Identify the result of a rightward shift in both AD and AS.
Identify the result of a rightward shift in both AD and AS.
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Higher output; price level change ambiguous. Both curves moving right increases output definitively.
Higher output; price level change ambiguous. Both curves moving right increases output definitively.
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What happens to the equilibrium level when both AD and AS shift leftward?
What happens to the equilibrium level when both AD and AS shift leftward?
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Output decreases; price level change ambiguous. Both demand and supply declining reduces output.
Output decreases; price level change ambiguous. Both demand and supply declining reduces output.
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Identify the effect of increased energy costs on the AS curve.
Identify the effect of increased energy costs on the AS curve.
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AS curve shifts leftward. Higher energy costs increase production expenses.
AS curve shifts leftward. Higher energy costs increase production expenses.
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Which policy can address a demand-pull inflation?
Which policy can address a demand-pull inflation?
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Contractionary fiscal policy. Reduces government spending or raises taxes to cool demand.
Contractionary fiscal policy. Reduces government spending or raises taxes to cool demand.
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What results from a rightward shift in the AS curve?
What results from a rightward shift in the AS curve?
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Lower price level and higher output. Increased supply creates downward pressure on prices.
Lower price level and higher output. Increased supply creates downward pressure on prices.
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Identify the impact of a decrease in resource prices on AS.
Identify the impact of a decrease in resource prices on AS.
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AS curve shifts rightward. Lower input costs reduce production expenses.
AS curve shifts rightward. Lower input costs reduce production expenses.
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How does an increase in interest rates affect AD?
How does an increase in interest rates affect AD?
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AD curve shifts leftward. Higher rates reduce investment and consumption spending.
AD curve shifts leftward. Higher rates reduce investment and consumption spending.
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Identify the primary cause of cost-push inflation.
Identify the primary cause of cost-push inflation.
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Leftward shift in the AS curve. Rising input costs push prices up from supply side.
Leftward shift in the AS curve. Rising input costs push prices up from supply side.
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What is the short-run impact of an increase in consumer spending?
What is the short-run impact of an increase in consumer spending?
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AD curve shifts rightward. Higher consumption increases total aggregate demand.
AD curve shifts rightward. Higher consumption increases total aggregate demand.
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What effect does a decrease in interest rates have on AD?
What effect does a decrease in interest rates have on AD?
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AD curve shifts rightward. Lower rates encourage borrowing for investment and consumption.
AD curve shifts rightward. Lower rates encourage borrowing for investment and consumption.
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What does a leftward shift in the long-run AS curve indicate?
What does a leftward shift in the long-run AS curve indicate?
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Decrease in potential output. Reduced capacity means lower maximum sustainable output.
Decrease in potential output. Reduced capacity means lower maximum sustainable output.
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State the result of an increase in AD when the economy is at full employment.
State the result of an increase in AD when the economy is at full employment.
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Inflation increases. At capacity, higher demand only raises prices.
Inflation increases. At capacity, higher demand only raises prices.
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Which factor shifts the long-run AS curve to the right?
Which factor shifts the long-run AS curve to the right?
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Increase in capital stock. More capital increases economy's productive capacity.
Increase in capital stock. More capital increases economy's productive capacity.
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What is the impact of an increase in productivity on the AS curve?
What is the impact of an increase in productivity on the AS curve?
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AS curve shifts rightward. Higher productivity reduces per-unit production costs.
AS curve shifts rightward. Higher productivity reduces per-unit production costs.
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What is the impact of a leftward shift in the AD curve on the price level?
What is the impact of a leftward shift in the AD curve on the price level?
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Price level decreases. Reduced demand creates downward pressure on prices.
Price level decreases. Reduced demand creates downward pressure on prices.
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Identify the effect of a decrease in AD on unemployment.
Identify the effect of a decrease in AD on unemployment.
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Unemployment increases. Lower demand reduces need for workers.
Unemployment increases. Lower demand reduces need for workers.
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What results from a simultaneous rightward shift in AD and leftward shift in AS?
What results from a simultaneous rightward shift in AD and leftward shift in AS?
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Price level increases; output change ambiguous. Demand increases while supply decreases, raising prices.
Price level increases; output change ambiguous. Demand increases while supply decreases, raising prices.
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How does a decrease in the labor force affect the AS curve?
How does a decrease in the labor force affect the AS curve?
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AS curve shifts leftward. Fewer workers reduce economy's production capacity.
AS curve shifts leftward. Fewer workers reduce economy's production capacity.
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What effect does an increase in export demand have on AD?
What effect does an increase in export demand have on AD?
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AD curve shifts rightward. Higher foreign demand increases net exports component.
AD curve shifts rightward. Higher foreign demand increases net exports component.
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Which scenario leads to a deflationary gap?
Which scenario leads to a deflationary gap?
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AS exceeds AD at full employment. Supply exceeds demand, creating downward price pressure.
AS exceeds AD at full employment. Supply exceeds demand, creating downward price pressure.
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In the AD-AS model, what occurs when AD exceeds AS?
In the AD-AS model, what occurs when AD exceeds AS?
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Inflationary gap. Excess demand creates upward pressure on prices.
Inflationary gap. Excess demand creates upward pressure on prices.
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What happens to the equilibrium output when AS shifts left?
What happens to the equilibrium output when AS shifts left?
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Equilibrium output decreases. Reduced supply decreases production at any price level.
Equilibrium output decreases. Reduced supply decreases production at any price level.
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Which effect results from a decrease in aggregate demand?
Which effect results from a decrease in aggregate demand?
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Lower price level and lower output. Reduced demand decreases both prices and production.
Lower price level and lower output. Reduced demand decreases both prices and production.
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State the impact of improved education on the long-run AS curve.
State the impact of improved education on the long-run AS curve.
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Long-run AS curve shifts rightward. Better education increases economy's productive capacity.
Long-run AS curve shifts rightward. Better education increases economy's productive capacity.
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What is the effect of a subsidy on production on the AS curve?
What is the effect of a subsidy on production on the AS curve?
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AS curve shifts rightward. Subsidies reduce production costs for firms.
AS curve shifts rightward. Subsidies reduce production costs for firms.
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Which factor causes the AS curve to shift leftward?
Which factor causes the AS curve to shift leftward?
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Increase in input prices. Higher costs reduce firms' willingness to supply.
Increase in input prices. Higher costs reduce firms' willingness to supply.
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What is the effect of a foreign recession on the AD curve?
What is the effect of a foreign recession on the AD curve?
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AD curve shifts leftward due to decreased exports. Reduced foreign income decreases demand for domestic exports.
AD curve shifts leftward due to decreased exports. Reduced foreign income decreases demand for domestic exports.
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In the AD-AS model, what is a demand-pull inflation?
In the AD-AS model, what is a demand-pull inflation?
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Inflation caused by a rightward shift in AD. Excess demand pulls prices higher throughout the economy.
Inflation caused by a rightward shift in AD. Excess demand pulls prices higher throughout the economy.
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What happens to the equilibrium price level if AD shifts right?
What happens to the equilibrium price level if AD shifts right?
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Equilibrium price level increases. Higher demand creates upward pressure on prices.
Equilibrium price level increases. Higher demand creates upward pressure on prices.
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Identify the effect of a decrease in government spending on AD.
Identify the effect of a decrease in government spending on AD.
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AD curve shifts leftward. Reduced government spending decreases total demand.
AD curve shifts leftward. Reduced government spending decreases total demand.
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