Changes in the AD-AS Model - AP Macroeconomics
Card 1 of 30
What is the short-run impact on price level when AD shifts left?
What is the short-run impact on price level when AD shifts left?
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Price level falls. Leftward AD shift reduces demand, lowering price level.
Price level falls. Leftward AD shift reduces demand, lowering price level.
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What curve shifts in response to a change in monetary policy?
What curve shifts in response to a change in monetary policy?
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AD curve. Monetary policy affects spending through interest rates.
AD curve. Monetary policy affects spending through interest rates.
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What happens to the AD curve during a financial crisis?
What happens to the AD curve during a financial crisis?
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AD shifts left. Financial crises reduce spending and investment confidence.
AD shifts left. Financial crises reduce spending and investment confidence.
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What shift occurs in AD if household wealth increases?
What shift occurs in AD if household wealth increases?
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AD shifts right. Increased wealth boosts consumption and aggregate demand.
AD shifts right. Increased wealth boosts consumption and aggregate demand.
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What is the effect on real GDP when AS increases in the short run?
What is the effect on real GDP when AS increases in the short run?
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Real GDP increases. Greater supply increases output at every price level.
Real GDP increases. Greater supply increases output at every price level.
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What is the short-run impact on AS due to a natural disaster?
What is the short-run impact on AS due to a natural disaster?
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AS shifts left. Disasters damage productive capacity, reducing supply.
AS shifts left. Disasters damage productive capacity, reducing supply.
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What is the short-run effect on price level if AS shifts left?
What is the short-run effect on price level if AS shifts left?
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Price level rises. Leftward AS shift reduces supply, raising price level.
Price level rises. Leftward AS shift reduces supply, raising price level.
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What happens to equilibrium real GDP if AS shifts right?
What happens to equilibrium real GDP if AS shifts right?
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Real GDP increases. Rightward AS shift increases output at every price level.
Real GDP increases. Rightward AS shift increases output at every price level.
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What is the effect on AS of a decrease in labor costs?
What is the effect on AS of a decrease in labor costs?
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AS shifts right. Lower labor costs reduce production costs, increasing supply.
AS shifts right. Lower labor costs reduce production costs, increasing supply.
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What happens to AS when productivity improves?
What happens to AS when productivity improves?
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AS shifts right. Higher productivity reduces per-unit costs, increasing supply.
AS shifts right. Higher productivity reduces per-unit costs, increasing supply.
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What happens to AS in the short run when input prices rise?
What happens to AS in the short run when input prices rise?
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AS shifts left. Higher input costs reduce profitability, decreasing supply.
AS shifts left. Higher input costs reduce profitability, decreasing supply.
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What is the short-run impact on the price level when AD decreases?
What is the short-run impact on the price level when AD decreases?
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Price level falls. Lower demand with fixed supply reduces equilibrium price.
Price level falls. Lower demand with fixed supply reduces equilibrium price.
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What effect does an increase in government spending have on AD?
What effect does an increase in government spending have on AD?
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AD shifts right. Government spending is a direct component of aggregate demand.
AD shifts right. Government spending is a direct component of aggregate demand.
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What axis represents the price level in the AD-AS model?
What axis represents the price level in the AD-AS model?
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Vertical axis. Standard convention for plotting price level in macroeconomic models.
Vertical axis. Standard convention for plotting price level in macroeconomic models.
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What is the impact on price level if both AD and AS increase?
What is the impact on price level if both AD and AS increase?
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Indeterminate. Opposite effects on price make the net result uncertain.
Indeterminate. Opposite effects on price make the net result uncertain.
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What is the effect on AS if there is a reduction in regulation?
What is the effect on AS if there is a reduction in regulation?
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AS shifts right. Reduced regulation lowers costs, increasing supply.
AS shifts right. Reduced regulation lowers costs, increasing supply.
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What does AD stand for in the AD-AS model?
What does AD stand for in the AD-AS model?
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Aggregate Demand. Represents total demand for goods and services in an economy.
Aggregate Demand. Represents total demand for goods and services in an economy.
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What curve shifts in response to a change in monetary policy?
What curve shifts in response to a change in monetary policy?
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AD curve. Monetary policy affects spending through interest rates.
AD curve. Monetary policy affects spending through interest rates.
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What is the short-run effect on AS if there is an increase in business taxes?
What is the short-run effect on AS if there is an increase in business taxes?
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AS shifts left. Higher business taxes increase costs, reducing supply.
AS shifts left. Higher business taxes increase costs, reducing supply.
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What is the short-run effect on price level of a fall in oil prices?
What is the short-run effect on price level of a fall in oil prices?
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Price level falls. Lower oil prices shift AS right, reducing price level.
Price level falls. Lower oil prices shift AS right, reducing price level.
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What is the short-run effect on real GDP of a technological advancement?
What is the short-run effect on real GDP of a technological advancement?
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Real GDP increases. Technology shifts AS right, increasing output at every price.
Real GDP increases. Technology shifts AS right, increasing output at every price.
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Identify the effect on real GDP if AS decreases.
Identify the effect on real GDP if AS decreases.
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Real GDP decreases. Lower supply at each price level reduces equilibrium output.
Real GDP decreases. Lower supply at each price level reduces equilibrium output.
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What is the effect on AD if there is an increase in net exports?
What is the effect on AD if there is an increase in net exports?
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AD shifts right. Higher net exports directly increase aggregate demand.
AD shifts right. Higher net exports directly increase aggregate demand.
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Identify the effect on price level if AS decreases.
Identify the effect on price level if AS decreases.
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Price level rises. Reduced supply with fixed demand pushes prices higher.
Price level rises. Reduced supply with fixed demand pushes prices higher.
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What happens to AS if there is an improvement in technology?
What happens to AS if there is an improvement in technology?
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AS shifts right. Technology improvements increase productivity and supply.
AS shifts right. Technology improvements increase productivity and supply.
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Identify the effect on real GDP if AD increases.
Identify the effect on real GDP if AD increases.
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Real GDP increases. Higher demand leads to increased production and output.
Real GDP increases. Higher demand leads to increased production and output.
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What effect on AS might result from an increase in energy prices?
What effect on AS might result from an increase in energy prices?
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AS shifts left. Higher energy costs increase production costs, reducing supply.
AS shifts left. Higher energy costs increase production costs, reducing supply.
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Identify the effect on the equilibrium price level if AD increases.
Identify the effect on the equilibrium price level if AD increases.
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Price level rises. Increased demand with fixed supply pushes prices higher.
Price level rises. Increased demand with fixed supply pushes prices higher.
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What happens to AD when taxes increase?
What happens to AD when taxes increase?
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AD shifts left. Higher taxes reduce disposable income, decreasing consumption.
AD shifts left. Higher taxes reduce disposable income, decreasing consumption.
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What happens to AD when consumer confidence increases?
What happens to AD when consumer confidence increases?
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AD shifts right. Higher confidence increases consumption, boosting aggregate demand.
AD shifts right. Higher confidence increases consumption, boosting aggregate demand.
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