Aggregate demand and aggregate supply Flashcards
1
Q
why Aggregate demand curve slope?
A
because an increase in price reduce the quantity demanded for goods and services, consumption falls, investment falls, net export falls.
2
Q
Why AD curve might shift?
A
in any event that changes the C, I, G, NX shift the AD curve, changes in price does not shift the AD curve but a movement along AD Curve.
3
Q
three theory of SRAS curve, some theories that cause imperfection?
A
- Sticky wages theory
in short run wages is sticky and adjust sluggishly.
4
Q
three theory of SRAS curve, some theories that cause imperfection?
A
- sticky price theory
in short run price is sticky because of the menu cost, as the price increases those firms that do not have menu cost can adjust, those who have menu cost adjust sluggishly causing their product to be demanded.
5
Q
three theory of SRAS curve, some theories that cause imperfection?
A
- Misperception theory
firms may confuse with changes with price and changes in relative price of the product
6
Q
stagflation?
A
case where falling of output and rising of price
