Aggregate Demand and Aggregate Supply - Macroeconomic Policy
10 important questions on Aggregate Demand and Aggregate Supply - Macroeconomic Policy
Reminder: what is self correcting in the long run?
How long could the process of self correction take?
What is bad about the aggregate output being below the potential output?
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What should the government use to get the economy back potential opt in the aftermath of a sift of the aggregate demand curve?
What do we call it when the government uses government policy to reduce the severity of recessions and rein in excessively strong expansions.
Can stabilization policy improve the economies performance? How?
through fiscal and monetary policy to bring the aggregate output to its potential output.
What could be a reason for fiscal policy not occurring in a country if that country has the ability to use those policies?
What happens of the government acts to increase the aggregate demand in order to limit the rise in unemployment?
Can we use macro policy to respond to supply shocks?
So macro policy cannot shift simply push the curve that shifted back to its original position
What are the two negative side effects of trying to fix a supply shock using macroeconomic policy?
- A fall in aggregate output leading to a rise in unemployment
- A rise in the aggregate price level
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