ad as short run

Question 1

what is price level

Answer 1

is the price for goods and services

Question 2

what is the wealth effect

Answer 2

when the price of goods decrease making people who hold money wealthier

Question 3

what is the net export effect

Answer 3

when prices of Canadian goods drop more foreigners will want to buy the goods and less Canadians will buy goods from foreigners so the net exports will raise but the imports will fall

Question 4

what is aggregate demand

Answer 4

its the negative relationship between price level and gdp so when price level goes down the gdp goes up cuz imports fall and exports rise

Question 5

how to determine the amount the AD curve will shift

Answer 5

it will shift horizontally the amount its changed

delta y = M x delta A

Question 6

what is aggregate supply

Answer 6

its the positive relationship between the price level and production

Question 7

what is the elasticity of AS curve

Answer 7

the AS curve is elastic meaning a small change in price causes output to change a lot

Question 8

AS curve slope

Answer 8

the slope of the AS curve is relatively flat but at high levels of output the curve is steep because its harder for a firm at high output to produce more and the firms would need a large price increase just to produce a little bit more output

Question 9

causes for a shift in AD curve

Answer 9

change in wealth 
change in expectations of the future 
change in business confidence 
change in inventories 
change in interest rate 
change in government purchases in G+S 
change in the tax rate 
change in the wealth of foreigners 
change in the exchange rate

Question 10

causes for shift in the AS curve

Answer 10

change in the amount of inputs (capital, labor)
change in tech
change in the price of inputs ( raw materials etc)