1)Two factors that may cause a shift in aggregate demand are changes in ___ and

Question

1)Two factors that may cause a shift in aggregate demand are changes in ___ and ___.

a.

existing physical capital and demographics

b.

expectations and wealth

c

political stability and wealth

d.

demographics and expectations

2) A change in ___ prices or wages may cause the supply curve to ___

a

aggregate and shift

b

commodity and shift

c

aggregate and move

d

commodity and move

3) When aggregate output is below potential output, an economy experiences a(n) ___ gap, and when aggregate output exceeds potential output, an economy experiences a(n) ___ gap.

a.

inflationary and recessionary

b.

expansionary and contractionary

c

recessionary and inflationary

d

normal and abnormal

4) The type of recession that is most challenging for policy makers to address is one that is caused by a ___ shock.

a

monetary

b

fiscal

c

demand

d

supply

existing physical capital and demographics

Explanation / Answer

1) Two factor that may cause a shift in aggregate demand are changes in expectation and Wealth. Both wealth and expectation are important determinant of Aggregate demand.

2)A change in aggregate price or wages may cause the supply curve to shift.

3)when aggregate output is less than potential output then economy experiences recessionary gap and when aggregate output is greater than potential output then economy experiences inflationary gap. Ans is C

4)supply shock is the most challenging for policy maker.

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